Closing a Company with monies owed to owners/directors

[Craggy]

My Company has been running for 4 years and has never made a profit, and submitted returns on time. The Company owes the owners 'Directors' 16k by way of salary and expenses currently charged to the Directors loan account. The Company has no income and the bank balance is £0.90
At present no monies are owed to outside interests. The Company is insolvent by way of monies owed to the owners. How can I close the company and avoid any potential liabilities.
Our year end is Jan 31st 25.

 

[ChrisCallaghan]

Hi @Craggy ,

Aside from the funds owed to the directors, does the company have any other liabilities or potential claims against it?

 

[Craggy]

The only monies owed are to the directors which have accumulated over the 4 year period.
The Company doesn't owe monies to anyone outside the owners. Owners have been taking nominal minimum salary and expenses on an ad hoc basis when income allowed and deferring salary and expenses to the DLA when income was low. No div paid throughout the 4 year period.

 

[ChrisCallaghan]

The you can simply apply to strike off/dissolve your company, following the guidance below:

Strike off your limited company from the Companies Register

How to close down your limited company by getting it struck off the Companies Register

www.gov.uk

Though the company is technically insolvent, assuming the directors would not object to the above, then there is no need to go through a formal liquidation process.

 

[Craggy]

Many thanks. Can you advise if a Directors Redundancy claim can be made without impacting the Company's striking off/dissolution?

 

[ChrisCallaghan]

Many thanks. Can you advise if a Directors Redundancy claim can be made without impacting the Company's striking off/dissolution?

I'm assuming you're referring to claiming redundancy from the government's Redundancy Payments Service?

If so, then no, this cannot be claimed from if the company is dissolved/struck off, as a dissolution is not a recognised insolvency process. If you wish to make such claims, you would need to consider closing the company via a Voluntary Liquidation process.

If you'd like to explore the liquidation process, happy to offer a free chat and offer no obligation quotes.

 

[Newchodge]

Many thanks. Can you advise if a Directors Redundancy claim can be made without impacting the Company's striking off/dissolution?

A Director's redundancy claim can only be made if the Directors can prove they were employees. Contract of employment and payroll RTI submissions showing they were paid at least minimum wage for all hours worked are needed. If they only received "nominal minimum salary" they are extremely unlikely to be able to make a successful redundancy claim.

 

[Elliot Green]

The companies house strike-off procedure appears available but not with redundancy in this type of instance.

 

[Lisa Thomas]

The Redundancy Payments Office is clamping down on rejecting as many director-employee claims as possible.

It's too complicated to explain here but is summed up in my video here:

- YouTube

Enjoy the videos and music that you love, upload original content and share it all with friends, family and the world on YouTube.

youtu.be

 

[ChrisCallaghan]

The Redundancy Payments Office is clamping down on rejecting as many director-employee claims as possible.

It's too complicated to explain here but is summed up in my video here:

- YouTube

Enjoy the videos and music that you love, upload original content and share it all with friends, family and the world on YouTube.

youtu.be

Wholeheartedly agree. If a director (or directors) was/were to ever consider a Voluntary Liquidation where the primary motivation is for claiming director redundancy, it is essential to explore how likely (or unlikely) it is for any claims to be approved.

 

[Craggy]

Thank you for your responses. Lastly, as the Company owes the directors un paid salary and expenses which the Directors have agreed will never be paid, and they do not intend to press for payment. How would this be shown on the cessation accounts. Is it satisfactory to just identify the debt on the balance sheet as liabilities of salary and DLA or is a separate entry required detailing?

 

[Elliot Green]

The Redundancy Payments Office is clamping down on rejecting as many director-employee claims as possible.

It's too complicated to explain here but is summed up in my video here:

- YouTube

Enjoy the videos and music that you love, upload original content and share it all with friends, family and the world on YouTube.

youtu.be

Too many directors cannot satisfy the test to show they remained as employees.

 

[Lisa Thomas]

Also a lot of them have been paid less than the minimum wage which is another issue.

 

[ChrisCallaghan]

Also a lot of them have been paid less than the minimum wage which is another issue.

I've had only a handful of successful director claims in the last few years, and half of those ended up being offset against an overdrawn director loan accounts. The less than minimum wage issue has certainly ended a lot claims.

 

[Lisa Thomas]

Agreed, the chances of getting a successful claim through now seem slim.

 

[eteb3]

un paid salary and expenses which the Directors have agreed will never be paid, and they do not intend to press for payment.

I’m no accountant, but if the directors write to the company (in their personal capacities obviously) and irrevocably waive all right to repayment, I can’t see why the debt can’t be written to zero. I think there was another thread on this not too long ago, which you might be able to dig up.

Technically the waiver isn’t legally binding, and may not be binding in equity either, but if directors consider any risk of a claim from themselves to be immaterial, that would seem squarely within the range of a true and fair view. If I were DIYing, I’d put a note in the accounts to explain.

 

[Bobbo]

I’m no accountant, but if the directors write to the company (in their personal capacities obviously) and irrevocably waive all right to repayment, I can’t see why the debt can’t be written to zero. I think there was another thread on this not too long ago, which you might be able to dig up.

Technically the waiver isn’t legally binding, and may not be binding in equity either, but if directors consider any risk of a claim from themselves to be immaterial, that would seem squarely within the range of a true and fair view. If I were DIYing, I’d put a note in the accounts to explain.

And what exactly is the benefit of doing this?

 

[eteb3]

You get a clean set of accounts rather than close it owing creditors.

 

[Craggy]

So technically the Company is Insolvent with monies owed solely to Directors/owners who have no intention of making a claim as confirmed in correspondence with the Company. And even though the accounts show negative assets, owed salary & expenses a simple application to strike the Company off 'as if it were solvent' would be in order without raising the interest of HMRC or Companies House.

 

[Lisa Thomas]

My understanding is that HMRC are only concerned when there are tax returns and/or tax liabilities outstanding.