I am looking into the prospect of a members’ voluntary liquidation along with my co-director. Our business has done well in the past, but is now on the decline and we can’t see a way forward for it. It is still solvent but our accountant tells us we could be in trouble within six months at this rate.
What’s the best way to go about closing a limited company early? What will happen to our business premises lease which expires in 13 months?
If you enter into a members’ voluntary liquidation (“MVL”) then the directors (or a majority of them if there are more than two) must make a statutory declaration of solvency, which confirms the company will be able to pay all its debts within 12 months. If this declaration is made without a genuine belief in its truth then there are penal consequences, so it is important that you are confident that the company can in fact pay all liabilities within a 12-month period.
Unless you are able to agree a surrender of the lease early then it would be necessary to pay the rent until expiry of the lease. You should also consider any possible dilapidations claim the landlord may have and it may be sensible to negotiate with the landlord with a view to agreeing a single lump sum payment in settlement of all current and future liabilities under the lease.
This is something that one of our licensed insolvency practitioners could assist you with before deciding if an MVL is suitable for your company. If it isn’t, you can still close the company but the procedure would be a creditors’ voluntary liquidation.