How do I Liquidate My Company?

August 1st, 2011

This is a question we’re often asked – how do I liquidate my company?  And it is normally asked in relation to an insolvent company.

The answer is very simple – there are 2 options – a voluntary liquidation or a compulsory liquidation.

Which is right, depends on what the directors/shareholders who asked the question (How do i liquidate my company?) want to achieve and how much help they want through the process.

The voluntary liquidation is the easiest option, all it takes is for a meeting of shareholders to pass a special resolution (75% or more of voting shareholders agree) to place the company into liquidation and pass an ordinary resolution (greater than 50% of voting shareholders agree) on the person to be appointed as liquidator.  If the company is unable to pay its debts, i.e. it is insolvent, then there will be a meeting of creditors held (usually) straight after the shareholders one to complete the formality of appointing the liquidator.

The shareholders meeting has to be held with a minimum of 14 days notice being given to shareholders (unless 90% or more of shareholders consent to it being less), whereas the creditors meeting has to be held with a minimum of 7 clear days notice being sent in the post to creditors.  The meeting of creditors must also be advertised in the London Gazette and any other medium if thought appropriate or necessary.

You should instruct a firm of insolvency practitioners such as BCR to assist you with this to ensure all the fundamental components of the process are fulfilled, which will avoid any future complications or challenges to the process.  At BCR we understand how difficult it is to take the decision to liquidate your company, so we take the stress and hassle away from you by performing the various functions on your behalf.

It is also possible to put a company into liquidation via the court – a compulsory liquidation or winding up – but this is less common.  Whilst this is often a cheaper option, a director and/or shareholder will not get as much help with the process from an insolvency practitioner and the director(s) can easily find themselves falling foul of the strict rules in relation to reuse of company name (Section 216 of the Insolvency Act 1986), something that can be easily covered in a voluntary liquidation.

If the company has assets, these will be sold for the benefit of creditors.  If a company has book debts, these will be collected in for the benefit of creditors.  If the directors/shareholders wish to commence trading in business again, they will either have to start from scratch or buy the assets from the liquidator.  Buying the assets back is very quick and simple in a voluntary liquidation, but much more drawn out in a compulsory liquidation leading to a possible break in trade.  They must also make sure they do not fall foul of the resuse of name matters mentioned above.  At BCR we ensure this is fully covered and that directors do not fall foul of these rules and receive the possible criminal and civil sanctions for not getting it right.

Once the company is in liquidation the liquidator will have many tasks to perform, but the majority of these will have no impact on the people who initially wanted to know ‘How do I liquidate my company?’, so the directors can concentrate on their new future without the burden of the company they used to run.

So to recap, how do I liquidate my company?

  • Board meeting to agree to commence process
  • Instruct insolvency practitioners to assist
  • Notice to members (at least 14 days unless agreement received to less)
  • Hold meeting and pass resolutions
  • Company is then in liquidation (but a creditors meeting needs to be held to fully commence process if company is insolvent)

To commence the process of liquidating your company, contact BCR on 0845 050 4444 or email insol@bcr-insolvency.co.uk

Out of the Blacks and into the red? Is a CVA alone enough?

July 18th, 2011

Blacks the leisure retailer has just announced that its debts are rising despite going through a Company Voluntary Arrangement (CVA) 2 years ago when it closed 88 stores in order to help preserve the business.

The unbelievably tough conditions on the high street are making it difficult for almost all retailers to just standstill.  We are currently advising a number of retailers on their businesses, but for most there is no future as they are unable to fund their way through a loss making time and there is no prospect of cutting enough costs to enable the business to (at beat) break even and/or get into a position where it can purchase current season stock.

But with the Blacks CVA, did it go far enough?  We are very experienced at dealing with CVA’s and our recent seminars highlighted how incredibly powerful these business recovery tools can be, but the main problem is that most businesses rarely utilise these to their full potential and very few make any fundamental changes to their business.

A Company Voluntary Arrangement (CVA) is designed to allow a company to trade on and make good its previous losses or cashflow difficulties that have led to it being insolvent or currently unable to pay its debts as and when they fall due.  But in trading on the management/board of directors often don’t change their business or the business model.  Quite simply, if nothing changes the same problem will reoccur unless it is a constantly rising market.  Even simple problems like bad debts that may have contributed to the prevailing problems can be stopped from reoccurring – credit insurance, better credit management, less exposure to or reliance on certain customers.

At BCR we are passionate about rescuing businesses, but more importantly we are passionate about making sure it doesn’t happen again, therefore we will not simply provide a solution to the current financial problem, we will look at, discuss and suggest changes that can be made to the business going forward, this can be as simple as reducing costs through our cost reduction partners or providing management with key support in areas where certain skills may be lacking – e.g. financial management or operations.

So perhaps Blacks didn’t do enough during and after its CVA?  There has been controversy over retailers using CVA’s to more or less solely renegotiate with their landlords or to enable store closures, but this can be effective, although this alone is rarely sufficient.  There are others who have faced similar problems and outcomes – JJB, Speciality Retail Group (Suits You Menswear), Focus.   Perhaps the outcome would have been different if the CVA was wider reaching and the companies using them had been bolder in restructuring their businesses.  Blacks and all retailers face tough times for at least the next 12 months.

A Company Voluntary Arrangement (CVA) can be used very successfully to literally turn around a business overnight, but it needs the right Insolvency Practitioner to work with to make sure the solution that is delivered is not just the simple mechanism of putting a CVA in place to allow debts to be paid over a period of time of typically no more than 5 years, but is a review of the business, a restructuring and assistance in turning the business around – business recovery. 

We are dealing with voluntary arrangements for companies, partnerships and sole traders where outcomes range from payment in full to percentage in the pound returns, over periods from 6 months to 7.5 years.

If you are contemplating a Voluntary Arrangement, choose your Insolvency Practitioner carefully as they are those that will deliver a simple solution and there are those that will work with you to solve your problems. 

Contact Kevin Lucas or Phil Wood to answer your queries.

Owner Invest Directors disqualified

June 30th, 2011

Two Lancashire directors have been disqualified for eight years each by the Insolvency Service.

William Mark Bingham and Janet Anne Bingham of Millennium Property Investment Limited, which traded as ‘Owner Invest’ (a company that claimed to act as a sales agency selling properties in Spain and Portugal), never completed a sale during its existence. When the company entered liquidation in March 2009 the statement of affairs showed that total losses to creditors was £757,908.

The company took depositis from 82 customers of £435,814 over a period of 14 months and did not pay them to a developer or refund the amounts. The company’s records were also inadequte. In the absence of accounting records for Millennium and/or satisfactory explanations it has not been possible to verify the financial dealings of the company and ensure that all the assets and monies of the company have been properly accounted for.

It is hoped this disqualification along with other well publicised cases in more recent months will deter individuals from acting improperly whilst an officeholder of a company. Ignoring a director disqualification is a criminal offence and anyone found guilty of breaching their disqualification can be fined and jailed for up to two years. To check if a director has been disqualified, there is a free online search facility via the Insolvency Service.

HMRC continue the squeeze on Time To Pay Agreements

June 28th, 2011

As we continue our series of Voluntary Arrangement Seminars and we cover many of the fundamental issues of achieving a successful Voluntary Arrangement including the position of HMRC, one point we make has been echoed in relation to informal arrangements too - Remuneration policies of owner-managers.

HMRC have now stated that they will refuse time to pay applications where dividends are used as part of a remuneration package. Whilst this is the most cost effective and tax efficient way of owners of a business being paid for their hard toil, HMRC believe that shareholders should be supporting their company, even where those shareholders are also directors, and not take dividends from profits.

Of course we can appreciate this sentiment on the one hand – if a business is profitable then it shouldn’t have debt, but if it has it should be using its profits to repay its debts and not pay dividends.  But as many of us know profit and cashflow are two entirely different things, and given this sentiment the idea of making a company incur additional expense and disadvantageious cashflow issues by converting dividends to directors salary is crazy when a business is struggling to pay its debts.  It’s being burdened with something it doesn’t need to have.

However, as is the position of influence (or even control) of HMRC, they can adopt this tough stance if they want to, and there is little that can be done about it.

What this means in practice is that yet again HMRC’s stance will force more businesses  into increased hardship and many will be forced to enter into a formal Company Voluntary Arrangement (CVA), Administration, Prepack Administration or even Liquidation.

So, the beast that is the Time to Pay Agreement could be facing the same fate as the dinosaurs – almost complete extinction with the exception of all but a few rare cases, so our message remains act promptly and seek advice early.

At BCR we’re used to dealing with HMRC, we’re used to their demands, we can negotiate time to pay agreements and achieve success, but when HMRC will not be moved we can also provide a solution to resolve the impending brick wall an owner managed business will face.  Get in touch for more help and advice.

Prepack Admin reforms due this week

June 23rd, 2011

As the Insolvency Service prepares to publish its draft proposals on reforming Prepack Administrations, we are concerned that a ‘well oiled’ machine will be slowed down, broken up or even overworked before the new reforms come in.

The proposals may be no more than an attempt by the government to gain a good bit of PR by tackling the bad reputation Prepack Admins have.  But when all within the Insolvency Industry are asking for the procedure not to be hampered by red tape that could defeat the very purpose of a Prepack – being able to sell a struggling business with great speed where confidentiality is maintained to preserve value and jobs, why press ahead with the changes?

Making a confidential solution public before it takes place could see suppliers, customers and employees leave overnight resulting in nothing but machinery and assets being left to sell a few days later.  Value could literally walk out of the door leaving creditors worse off whilst increasing the numbers of “liqui-strations”.  Worse still, perhaps the unscrupulous practices it is believed these procedures are designed to stop may have the opposite effect with pre insolvency asset and business disposals taking place which are not controlled by a Licensed Insolvency Practitioner acting as an officer of the court whilst in the position of Administrator . Let’s hope this doesn’t happen.

Whilst we appreciate the views of those on the receiving end of a Prepack , it is still possible to phoenix a company after liquidation, yet this attracts little or no criticism.

So if the expected proposals come into force there could be a rush of prepacks taking place before the new rules, whilst the numbers of Prepacks may go down after implementation, but conversely the numbers of liquidations or the underutilised yet powerful recovery tool the Company Voluntary Arrangement (CVA) may rise.  So it could be mixed news for creditors all round, we will have to wait and see.

HMRC Distraint – Beware they bite!

June 22nd, 2011

HMRC’s new stance on the policy of distraint means that their threats must no longer be taken lightly

As HMRC struggle to collect the £1bn outstanding on Time to Pay Arrangements, they are adopting tougher and tougher approaches with taxpayers across the board.  And with the news that from July this year the tax office will no longer release information on time to pay schemes many businesses should be very worried as it appears the taxman is abandoning its policy of support.

HMRC’s policy on distraint for tax arrears has been fairly relaxed for a long time.  Where distraint (where a bailiff attends a business’ premises and seizes its assets) has been considered necessary, there was a good chance of negotiating an acceptable settlement which would result in the goods being left in place and the business surviving.

However, this stance has now changed and HMRC distraint could signal the end for any business.

Where HMRC distrain on the assets of a business (company, partnership or sole trader), the business will have 5 days to pay the outstanding debt IN FULL.  There is no chance of reaching a settlement after this or for time being allowed for advisers to review the financial position and attempt to agree a Time to Pay Arrangement.  If attempts are made to place the company into Liquidation or Administration, HMRC will continue with their action and seek court approval where necessary.

HMRC’s stance is clear and unwavering – If the debt is not paid in full an auctioneer will be instructed to value, remove and sell the goods even if the goods are worth less than is owed.

One auctioneer advised us the business or business owner will also not be able to buy the goods back from the auctioneer for more than the auctioneer believes they are worth – i.e. the commercial reality of putting HMRC in a better position is now no longer acceptable – he is now under strict instructions to remove the goods and sell them at public auction.  The business or business owner may attempt to buy them back at auction, but of course any attempts may be unsuccessful, but far more worryingly the consequence of asset removal will be that almost no business will survive – a restaurant needs kitchen equipment and tables and chairs, a factory needs its machines and any service based company needs its IT equipment.

This toughened stance is very worrying, and whilst we are sure it will encourage some to pay up in full, how many companies have the ability to pay in full now?  Whilst we cannot be certain, the most likely answer is very few.

So, once HMRC threaten distraint, ignore them at your peril.  Seek professional advice immediately to protect your business and its stakeholders.

Contact us for help, advice or more info

Land Strategy plc directors disqualified for 27 years

May 31st, 2011

Despite creditors losing out for only £78,900 the directors of Land Strategy plc, a property company that sold plots of land in Studley, West Midlands, in a land banking scheme, have been disqualified for a total of 27 years for selling worthless plots of land at inflated prices.

Land Strategy plc was placed into creditors’ voluntary liquidation on 30 July 2009, with an estimated deficiency to creditors of £78,900.   Before liquidation the company sold plots of land on a 38 acre green belt site at Studley in Warwickshire marketing the plots as having investment potential were planning permission obtained for the land.  In reality the plots were effectively worthless.

The Insolvency Service’s Company Investigation team in Manchester investigate the conduct of Kevin Hilton of Crosby, Merseyside, Lynne Hilton of Burscough, Lancashire and Darren Butt of London, during their time as directors.  They found that the directors set out to sell land with no value at a significant profit and preyed on members of the public with a hard sell and misleading information.

The general public need to be aware that a plot of land in a field may well not be an asset with investment potential and if promised returns appear to be too good to be true, they probably are.

Disqualification undertakings to stop Kevin Hilton, Lynne Hilton and Darren Butt from managing or in any way controlling a company or being a director were accepted for 12, 3½ and 12 years respectively.

It’s interesting to note that despite the loss to creditors being relatively small, the directors were still disqualified for their unfit actions.  Many people believe that if creditors do not lose out in an insolvency or liquidation for a significant sum the directors will face no action, however this case highlights the risks of not acting with good faith. 

The specific allegations that were not disputed were:
  • Land Strategy caused its customers, by misrepresentation or by omission, to purchase the plots at an excessive overvalue, when they knew or ought to have known that there was little or no prospect of the plots achieving planning permission for residential development.
  • The land being sold was divided into 429 plots by reference to an estate plan. The land had cost of £6,579 an acre. Land Strategy sold the plots at prices ranging between £101,124 and £311,957 an acre, at an average of £200,883. Land Strategy represented to its customers that the plots were an “investment“ but did not inform its customers that the land was subject to restrictive covenants limiting its use to agricultural use, and requiring the payment of 25% of any uplift in value were planning permission to be obtained and the contract terms were set up so that it would have been impossible to discover these covenants until they were bound into the contract.
  • Land Strategy informed some of its customers that planning permission had been obtained or applied for parts of the site, when it had not. Subsequently the local authority refused an application for outline planning permission on one of the plots. During the period of Hilton and Hilton’s directorship Land Strategy’s receipts totalled £975,952. During the period of Butt’s directorship Land Strategy’s receipts totalled £1.93m.
In addition Butt did not dispute that:
  • He failed to ensure that Land Strategy maintained and/or preserved adequate accounting records or alternatively, he failed to deliver up such records to the Joint Liquidators. As a result it has not been possible to verify the purpose of cash withdrawals totalling £148,600 made between October 2008 and June 2009 nor transfers totalling £1,500,116 paid out of Land Strategy’s bank accounts between February 2008 and the date of liquidation .
  • From 19 May 2008 to 30 July 2009 he failed to ensure that Land Strategy complied with its statutory obligations to submit returns and make payments thereon to HM Revenue and Customs.

Courts not sympathetic when it comes to Bankruptcy

May 28th, 2011

The court has a limited discretion not to make a bankruptcy order where the debt is the subject of a statutory demand which has not been paid and is outstanding at the time of the bankruptcy petition hearing.    

In Adeosum v HM Revenue & Customs (HMRC), the bankrupt entered into a contract with the Revenue in relation to pay his tax over a period of time tax but failed to do so. Consequently HMRC served a statutory demand before preseting a bankruptcy petition. 

At the first hearing the petition was adjourned because the debtor convinced the judge and HMRC he could obtain £50,000 to deal with the debt.  At the next hearing the soon to be bankrupt debtor did not appear, and as payment of the debt hadn’t been made the judge took the view the debt was not disputed and a bankruptcy order was made.

The bankrupt was a GP therefore his bankruptcy would affect his ability to earn a living.  The bankrupt appealed the decision because he claimed the judge had failed to consider his reasonable offers to pay, the draconian effect of the order on his job, proportionality and that he had not had a fair trial under Article 6 of the European Convention on Human Rights.

On the appeal the judge stated he only had limited discretion in such a case.  Although hardship was to be taken into account, it was not sufficent grounds not to make a bankruptcy order. The debtor had had ample opportunity to be heard and to pay the debt and had made numerous promises to pay.

It is clear therefore that courts will not take a sympathetic view of a debtor’s future circumstances and difficulty in earning a living when deliberating whether to make a bankruptcy order where a debt is not disputed and the debtor has had ample opportunity to make payment but has failed to do so.

We are currently dealing with a GP/Doctor in an identical situation.  We are seeking the approval of an IVA and the annulment of his bankruptcy.

Anyone facing a bankruptcy hearing should not take the matter lightly and should seek appropriate advice early.

Are your advisers qualified, no I mean properly qualified, have you asked?

May 24th, 2011

If you take nothing else from this site or this blog, just take this – check if you advisers are qualified in the advice they give.  How do you do that?  Read on

Over the last 5 years or so many ‘business, debt and insolvency advisers’ have arisen to capitalise on the growing debt burden of UK businesses and Individuals – some have even set themselves up as ‘charities’ – but this term should be used loosely for nearly all debt charities.

Many of these ‘insolvency advisers’ do not however carry the same safety or security for a customer as Licensed Insolvency Practitioners.  Let’s deal with some facts and myths about Insolvency Practitioners and other advisers:

Licensed Insolvency Practitioner Other Adviser
Qualified? Yes No qualifications necessary
Licensed to provide and administer Insolvency Solutions? e.g. Administration or a CVA Yes No
Regulated? Actions and holding of licence overseen by an Authorising body No regulation
Carries Professional Indemnity Insurance? Mandatory Should do, but do they?
Experienced Has to demonstrate competence and experience to be given an Insolvency licence No competence or experience necessary and no need to demonstrate this to anyone
How is knowledge of Insolvency legislation, its impact and consequences demonstrated? By sitting and passing the JIEB professional exams, which is the only way of obtaining an Insolvency Licence Because they tell their customers they know about it.
Number in UK Approx 1,300 Unknown – not licensed, regulated or monitored because anyone can be called an ‘adviser’

 

So how do you know whether you are speaking to the right people or not? Simple – ask them for the name of their in house Insolvency Practitioner(s), the name of their authorising body and their licence numbers.  The validity of this can then be checked with the Insolvency Service here.

So why would you ever take advice or engage someone who isn’t properly qualified, licensed, regulated or insured to advise you in an area?

Insolvency (an inability to pay debts) is complex, specialist and only Licensed Insolvency Practitioners know the Insolvency Legislation, have demonstrated they know it, are licensed to provide solutions and are regulated and insured to cover customers in the event they are negligent, so why go elsewhere?

At BCR both Philip Wood and Kevin Lucas are Chartered Accountants and Licensed Insolvency Practitioners, whose licence numbers are 5396 and 9485 respectively.  If you want qualified advice, contact us today.

« Older Entries

BCR offer insolvency services throughout Staffordshire, Shropshire, Cheshire and Lancashire with insolvency practitioners helping individuals and companies in Stoke on Trent, Shrewsbury, Telford, Bolton, Preston, Blackburn, Stockport and Manchester.