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What can you do if the grant funding available is just not enough and you can’t get a Coronavirus Business Interruption Loan (CBIL) or a Bounce Back Loan (BBLS)?
You may need to consider insolvency. Liquidating your business will certainly not have been part of the original plan, but it happens, and it may not be as bad as you think. Here are some of the advantages:
1. The wrongful trading laws were suspended on the 1st March 2020 meaning directors are very unlikely to be held personally liable for the business debts.
2. Unsecured creditors such as VAT, PAYE, Business Rates, suppliers and unsecured/non-guaranteed bank loans and overdrafts all end with the company going into liquidation.
3. All employees are laid off and the UK Government backed Redundancy Payments Service (“RPS”) will pay out;
a. redundancy up to 30 weeks’ pay for the full 20 years of service.
b. pay in lieu of notice – a week for every year worked to 12 weeks.
c. arrears of pay – up to 8 weeks.
d. holiday pay - up to 6 weeks
All these payments are capped at £538 per week.
4. The employee rights do not automatically move to a new business owner (known as TUPE) as they do in an Administration.
5. The company assets can be bought from a liquidator (like us) at market value. If they need to, the directors can usually apply to use the same or similar company name helping keep some form of continuity.
6. There is no more need to file annual accounts, VAT or PAYE returns.
7. A new limited company can be set up right away.
There are of course disadvantages. Amongst others, the company loses its assets, it incurs reputational damage and overdrawn director loan accounts have to be repaid. You can search for the full list of “Advantages and Disadvantages of liquidation” here: https://www.kirks.co.uk/faqs/company-liquidation/advantages-and-disadvantages-of-liquidation/.
We can normally liquidate a company within seven days. All the liquidation process can now be done online. There is no need to meet in person unless you want to.
If you want to find out more, please contact me David Kirk on 07515 100766 or email email@example.com for a free initial consultation where we will discuss the options available to you (as illustrated in the table below).
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