Close down business- no assets with debt

[Frances96!]

Hi,

So I have been running my business since March 2020 in the trade industry. All was going well until the past year I have racked up a lot of business LTD company debt, suppliers, BBL. Incomings from the business wasn’t great I was spending a lot more on materials and jobs then I was actually earning. Bringing in hardly any income for me personally which resulted in myself getting into debt.

I made the decision in august that the business isn’t viable it’s not worth the stress and all the hard work I put into it. It was putting a huge financial strain on my family as most months we couldn’t even pay rent…

Spoke to my accountant who has done the end of year accounts for 2021 - where I owe HMRC & to thre directors loan account. He mentioned doing 2022 asap to see if we can amend the figures as I mentioned the business hasn’t done well this year.
I have had creditors now chasing me for the debt I owe with court letters coming through, I am behind on BBL payments. I cannot afford to pay the £4-£5k to liquidate my business myself. I have had advice today basically to speak to the creditors and ask them to petition for the business to be liquidated this then allows me to avoid the cost but can be time consuming.

Not only that but I have a client who I done work for back in January trying to get half of what they paid me back as they are not satisfied with the work. “Basically they were really impressed with the work, however randomly one day they weren’t happy and requested that they will get a building instructor in to assess the work, I packed up my tools and said that’s fine il wait for them to assess and go from there, 9 months later they have sent me a letter stating they will be taking me to court unless I pay them £4.5k which 1 - I DO not owe them 2 - I do not have the funds even if I did 3- if they were to take me to court what would happen if the company currently isn’t trading (not officially as nothings has been listed on company’s house)

- Shall I speak to the creditors and request them to do this?
- can they try and come after me IE take belongings? I have NO assets what so ever?
- if they do end up liquidating on my behalf how long will this stay on my personal file I am currently in an IVA only just set up?
- what shall I do I am worried about being taken to court, I just don’t have the funds.

I have just got a full time job employed to try and get my life back on track as this has mentally and physical drained me and my family. I just want it over with but like I said I cannot afford to pay for it to be done fast…

 

[ChrisCallaghan]

Hello Frances,

Firstly I am very sorry to hear about your situation. This is a tricky situation, whereby getting things done quickly, vs being unable to fund a liquidator's fee are almost in opposition. The figure you mention of £4,000 - £5,000 for a Voluntary Liquidation sounds about right. Have you actually spoken with an insolvency practice to get that figure? Are there any company assets, debtors etc available to help you cover this fee? Have you explored whether you would be personally entitled to any redundancy from the government if you went through a Voluntary Liquidation process?

Ultimately, given the stress you are experiencing, a Voluntary Liquidation would be the quickest way to put these matters to bed. Myself or any of the insolvency regulars here on UKBF would be happy to give you further advice on this if you need it.

If you cannot raise the funds to cover a liquidator's fee, then you have been advised right. The best option would be to write to the creditors to invite them to wind up your company (aka compulsory liquidation). There is a well written plan on this forum, including template letters, to help you with this:

CLOSING A LIMITED COMPANY WTH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER

CLOSING AN INSOLVENT LIMITED COMPANY WITH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER If a company is unable to carry on trading due to becoming insolvent the standard procedure for closing it down is for the directors to appoint an Insolvency Practitioner to liquidate it...

www.ukbusinessforums.co.uk

Unfortunately this plan gives no certainty. There is no guarantee that any of your creditors will take such action, and more importantly there is no telling when. If no creditor comes forward to wind up your company, you will then be left waiting for the company to be dissolved by Companies House for non-filing of accounts. The positive with this plan, is that it is free. The major negative is that there is no telling if or when a creditor will come forward to wind, and during that time your company still legally exists - meaning all contact and debt collection activities from your creditors can continue.

 

[ChrisCallaghan]

if they do end up liquidating on my behalf how long will this stay on my personal file I am currently in an IVA only just set up?

Any liquidation will not show on your personal credit file, however an IVA will. An IVA will show on your credit file for 6 years from the start date of your IVA. Have you spoke to an insolvency practice about an IVA? Are those advisors also aware of the Ltd company issues?

Please bear in mind that the IVA will only be for your personal debts, not any Ltd company debts (though an IVA would include any personal guarantees). Once in place creditors included in your IVA could not take recovery action against you personally, but any creditors of the Ltd can still persist with collection activities, until it is either placed in liquidation or dissolved.

My own suggestion would be to do your IVA through an insolvency practice that also provides corporate insolvency services, such as liquidation. You would better served doing an IVA with an insolvency practice who can take the situation of your Ltd company into account. Again, myself or any of the insolvency regulars here at UKBF would be happy to help with that.

 

[Michael Loveridge]

- Shall I speak to the creditors and request them to do this?
- can they try and come after me IE take belongings? I have NO assets what so ever?
- if they do end up liquidating on my behalf how long will this stay on my personal file I am currently in an IVA only just set up?
- what shall I do I am worried about being taken to court, I just don’t have the funds.

To deal with each of your questions in order:

- there's no point - it would cost a creditor quite a lot to wind up your company, and as they wouldn't get anything out of it why would they throw good money after bad? This is a complete non-starter.

- creditors can only enforce against assets that belong to the company. They cannot enforce against assets that are your personal property.

- they won't liquidate the company `on your behalf' - see above. But even if one of them did decide to do so as a matter of principle there would be no reference to it on your credit file.

However, as has been said, if you're in an IVA anyway that is a huge red flag on your credit file. Are you sure an IVA is the best option? How much do you owe in total? In my experience a lot of people have been conned into them by unscrupulous Insolvency Practitioners eager to get their hands on the thousands of pounds in fees that are charged. In many cases other, much cheaper options are available, but the unfortunate debtor is never advised about them as they don't make any money for the adviser.

- You don't have to worry about being taken to court. If anyone does issue court action it will be against the company, not you personally. You can therefore just ignore it. The creditor will get judgment against the company, but it's not worth the paper it's written on, and will have no effect on you personally.

There's no justification for paying several thousand quid out of your own pocket to a liquidator in this situation, particularly as you can't even pay your existing debts. Yes, it will be quicker than waiting for the company to be struck off, but after 3 or 4 months the creditors will probably have given up anyway, so the additional wait is of little consequence.

 

[Philipmcg]

im in a similar situation and this thread has helped. my health was so bad i had to resign as director . we were owed so much money from a company going into liquidation owing us 90K and then we thought we would get some return but only getting 20p in the pound. have an ongoing legal case brought against the company , but it hasn't been trading in over 15 months but the bank has put an objection into us being struck off as i can't pay the bounce back loan. i don't know what happens with the legal case? it hasn't been charged - it was a summons i don't know what happens now as no directors in place. no money to pay for legal defence and i'm technically nothing to do with the company any longer. i'd appreciate anyones advice on this.

 

[Gyumri]

You say your company has received £18,000 presumably from the liquidator of your company's former debtor so the money must be somewhere. It could be used to pay off the bbl in installments if there is any left. You say that your company is also being sued but you have no concern about that fact because you are no longer involved with it.

So what is there to be worried about? If your former company doesn't respond to the claim a default judgment may be granted at the request of the claimant. If your former company has no assets then that would be a hollow victory for the claimant which might apply to wind your former company up.

So I would grab some popcorn and sit back and relax if you've done nothing wrong.

 

[Philipmcg]

no we haven't received it, its only at admin stage and if we get it the bank will certainly get it.

yes i shouldn't be worried its just not what i wanted and i do stress over all of this

 

[Gyumri]

If the business model is viable then you can always make a fresh start.