When a company is dissolved, although it is struck off the register at Companies House, it can be restored at a later date should a creditor make a claim, or assets come to light that need to be dealt with.
This is why it is better for directors to consider liquidating their company rather than closing it down via dissolution. Although the liquidation process requires the involvement of a licensed insolvency practitioner (IP), it offers valuable peace of mind to directors that the company is irrevocably closed.
Furthermore, directors may be able to claim redundancy when their company is liquidated. It is a little known fact that directors can also be employees of their company under certain circumstances, and therefore entitled to the same statutory payments as members of staff when the company is closed down via liquidation.
Begbies Traynor is the leading professional services practice in the UK. We have extensive experience of company liquidation, and are available for appointment as liquidators.
If the company is solvent, it may be liquidated via the Members’ Voluntary Liquidation process, or MVL. Directors must swear a Declaration of Solvency in the form of an affidavit, stating that the business can pay all its liabilities plus the costs of liquidation within a 12-month period from the date of liquidation.
If this is not possible, an insolvent liquidation procedure called Creditors’ Voluntary Liquidation (CVL) can be used.
Liquidating a business requires the appointment of a licensed insolvency practitioner. In the case of an MVL they are appointed by company shareholders, whereas in a CVL the liquidator is appointed by the members. The appointment is typically supported by creditors but they are able to appoint their own liquidator subject to certain criteria.
When the company enters a Creditors’ Voluntary Liquidation, directors may be able to claim redundancy and other statutory payments such as arrears of salary, holiday pay, and pay in lieu of notice.
This claim can constitute a substantial sum which will probably make liquidation more cost-effective overall. Eligibility criteria for claiming redundancy as a company director includes:
The amount of redundancy pay is calculated using a director’s age, length of service, and salary level. Claims are sent to the Redundancy Payments Service (RPS) which is a division of the Insolvency Service, and are generally made from the National Insurance Fund (NIF) approximately six weeks from the date of liquidation.
If you are considering the closure of your company, Begbies Traynor can offer professional advice on the best way to do so. Our licensed insolvency practitioners have vast industry experience, and will ensure you understand all your options. We work from 44 offices around the UK - call one of the team for a free same-day consultation.