Winding Up a Limited Company as an escape from Insolvency
The term business winding up is one which encompasses both a creditors voluntary liquidation and also a compulsory winding up. The creditors voluntary liquidation is by far the most used corporate insolvency procedure. It is initiated by the directors, who advise the shareholders (in a small company) usually the same people, that the company is insolvent and that there is no chance of saving the company and that it needs to be closed down.
The creditors at a meeting are advised of the financial state of the company and asked to vote to place it into liquidation. The creditors are allowed to question the directors at the meeting as to the reasons for failure of the business. Sometimes this can be distressing for a director especially when the creditors are persistent in their questioning, but more often than not, creditors do not even attend in person at the meeting and instead vote by proxy to liquidate the company. A Professional should advise directors who seek their advice to take steps to wind up their own businesses, rather than sit and wait for a creditor to do it as it shows the liquidator that one is complying with the obligations of a director.
A compulsory liquidation is begun by petition by a creditor who is owned more than £750 and follows the service of a statutory demand. A petition is issued out of the local county court in which the registered office is situated, if it has bankruptcy jurisdiction. There are not many of these issued every year and those that are, are usually started by the Inland Revenue. Creditors do not like to use them as they are expensive and would very rarely result in even the costs of the petition being recovered. In the very exceptional case, taking this step, may lead to payment of the debt due to the creditor being made, but if this is after advertisement of the petition it can cause major problems.
If you have been served with a statutory demand, as a company and need advice on how to oppose it, or you have tax and NI issues, and are worried about action to be taken by the Inland Revenue, you need to make a call to a professional advisor, who will be able to assist.
The creditors at a meeting are advised of the financial state of the company and asked to vote to place it into liquidation. The creditors are allowed to question the directors at the meeting as to the reasons for failure of the business. Sometimes this can be distressing for a director especially when the creditors are persistent in their questioning, but more often than not, creditors do not even attend in person at the meeting and instead vote by proxy to liquidate the company. A Professional should advise directors who seek their advice to take steps to wind up their own businesses, rather than sit and wait for a creditor to do it as it shows the liquidator that one is complying with the obligations of a director.
A compulsory liquidation is begun by petition by a creditor who is owned more than £750 and follows the service of a statutory demand. A petition is issued out of the local county court in which the registered office is situated, if it has bankruptcy jurisdiction. There are not many of these issued every year and those that are, are usually started by the Inland Revenue. Creditors do not like to use them as they are expensive and would very rarely result in even the costs of the petition being recovered. In the very exceptional case, taking this step, may lead to payment of the debt due to the creditor being made, but if this is after advertisement of the petition it can cause major problems.
If you have been served with a statutory demand, as a company and need advice on how to oppose it, or you have tax and NI issues, and are worried about action to be taken by the Inland Revenue, you need to make a call to a professional advisor, who will be able to assist.
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