Some have strong cash reserves, assets, and make sufficient profit but their directors want to go in a different direction.
Some might want to try a new venture in a different field and can’t split their time and energy between two or more projects.
Others might want to take time to enjoy their good fortune, share the rewards and enjoy the fruits of their efforts>
For others it might finally be time to retire and look back on a job well done.
Whatever the reasons – a solvent company can decide to dissolve itself.
There’s several benefits to this approach but one of the most attractive is that they can access Entrepreneurs’ Relief so it’s more tax efficient.
The MVL is also relatively quick.
If there’s no complications the company could be placed into Liquidation within a working week and the company dissolved within a few weeks.
Obviously, the more work the liquidator has to do, the longer the process will take.
We’ll happily take care of these details for you but it’s quicker and more financially beneficial to deal with them before liquidation.
Any company looking to close down and go into liquidation doesn’t have to clear it’s debts straight away.
As long as they could reasonably be expected to pay them off within a 12 month period - either by selling off assets or making payments from reserves or current accounts - and still have assets remaining, then a Members’ Voluntary Liquidation would be the most appropriate method of closing.
There are several benefits to this approach but one of the most attractive is that any assets or cash that can be distributed back to members and shareholders would be taxed at 10% under Entrepreneurs’ Relief rather than the usual, higher rate.
Another comparative advantage of an MVL is the relative speed of the process.
If all shareholders are in agreement then it could be placed into liquidation within a working week. If there are no assets for the liquidator to place for sale and just cash to repay creditors and remit back to shareholders then the entire process can be completed and the company dissolved within a few weeks.
Obviously, the more work the liquidator has to do such as selling assets, sourcing and verifying creditor claims, the longer the process will take. We advise that while we’ll happily take care of these details for you, it’s quicker and more financially beneficial to deal with them before liquidation.
There are four main steps to complete a successful solvent liquidation:
- Formally instruct us to help you - we begin with a review of the company’s finances.
- This forms the majority of a statement we prepare on the company’s assets and liabilities. All directors sign this as a Declaration of Solvency.
- A liquidator is appointed and begins the process of selling and realising the company’s remaining assets.
- Once all creditors and costs have been repaid in full, they distribute any surplus money among shareholders.
- Straightforward and inexpensive compared to other liquidation processes
- Any surplus assets can be either bought back or transferred to shareholders
- Entrepreneurs Relief can bring significant savings
- Creditors receive their money in full
- The liquidator doesn’t have to prepare a report on the conduct of directors
- More expensive than Dissolution
- The company has to be solvent. If it later materialises that the company is unable to settle all its debts then the directors have committed an offence
Another form of Solvent Liquidation is Dissolution or Striking Off. Companies can only complete this under a certain set of circumstances.
The business must have ceased all activity including trading for a total of three consecutive months and no longer hold any assets.
It should also have cleared all of its debt. A director looking to dissolve their business with some debt outstanding could find themselves being held personally liable for it and subject to potentially considerable costs if the company has to be resurrected to pay them off.
Dissolution itself is a relatively simple, inexpensive and straightforward matter as it entails completing some correspondence at Companies House.
The process takes approx. three months but includes a statutory two months notice period given at Companies House.
- No creditors meetings, directors reports compiled or additional bureaucracy
- All creditors are paid their money in full
- Remaining assets can be transferred directly to directors or shareholders
- Any existing contracts or finance agreements remain in place
- Various stakeholders can apply to resurrect the company if correct procedure isn’t followed; the company has been active and trading in the three months prior to dissolution and if any directors have committed fraud
- Directors could be held personally liable for any of the company’s outstanding debts or liabilities
Winding Up a Partnership
Like any other legal arrangement - partnerships also may come to an end.
It might be for business reasons, legal affairs or even personal - people and businesses change over years and one of you might want to do something else.
Fortunately, there are easy ways to dissolve a partnership just like any other legal business entity.Find out more
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