Closing a limited company in debt with no funds or assets

[ChrisCallaghan]

I'll preface the below with a note that I'm very solvent, I'm just interested in how these things work!

If the company is going for involuntary striking off by not filing a confirmation statement, what is the mechanism by which the bank even finds out about this before it is too late - especially if the BBL isn't yet making repayments?

Assuming the bank do find out and object, and then petition for winding up, is it a given that it goes to the official receiver, or do they sometimes opt to bring in an IP?

Most banks subscribe to a credit checking agency who will notify them of them of Companies House updates, e.g. a Compulsory Dissolution notice, or monitor the Gazette feed.

Banks with an unsecured lend have the same rights as any creditor... if their petition to wind up is successful they can vote for the appointment of their preferred IP to act as liquidator. Usually these types of cases will stay with the OR, or a local IP may pick up the case from the OR.

 

[Lisa Thomas]

Bumper paydays on the horizon for insolvency practice then... For a bank to be able to claim their 50K from the govt it's clearly going to make sense for them to wind up a company... unless the Govt decide they'll pay out on the guarantee with the bank having stopped short of winding up.

I wonder what the details actually are of how this works.
The publicly available guidance to companies looking to offer BBLS says the following (https://www.british-business-bank.co.uk/wp-content/uploads/2020/07/20200717-BBLS-RfP-Clean.pdf) :
"In the event of a borrower defaulting, the Lender may claim up to 100% of all amounts due under the facility (net of any recoveries) from the Guarantor."
Would fees incurred by a bank in recovery be able to be recovered? Nice little money earner there if banks can bill back recovery costs to the Govt at £20 a letter etc. If they can't, they stand to lose their shirts.

In the case of a firm with, say, a 10K BBLS without any repayments made that folds; the bank either does nothing and gets nothing, pays 5K to wind up, to claim 10K (or maybe 10K + 5K). One probably sees the bank still profiting, the other massively in the red.

There must be a doc somewhere which describes what the banks have actually signed up to have to do to show they've attempted recovery. Just objecting to strikeoff can't be enough can it? I mean, it doesn't ultimately achieve anything unless the next step is taken?

The bank's will have to Liquidate via Court and it is likely that the Official receiver will deal with the majority of cases in house, rather than farm out to IPs.

 

[ChrisCallaghan]

The bank's will have to Liquidate via Court and it is likely that the Official receiver will deal with the majority of cases in house, rather than farm out to IPs.

I agree. I also don't think many of the major banks will bother voting for a preferred IP, apart from the likes of Funding Circle or similar.

 

[Dobbollah]

If the bank objects to the companies closure, I assume when the time comes there's still a requirement to file company accounts at the relevant time.....

At that point do you show the company dormant?

 

[Scalloway]

A company is dormant for Companies House if it has no significant transactions in the financial year. More information here.

https://www.gov.uk/government/publi...of-a-company-part-1-accounts#dormant-accounts

 

[JEREMY HAWKE]

If the bank objects to the companies closure, I assume when the time comes there's still a requirement to file company accounts at the relevant time.....

At that point do you show the company dormant?

No you do nothing if you have stopped trading .If your claiming the firm is dormant and not closed then thats a different matter

 

[Chris Ashdown]

How was the BBL spent, was it paid in dividends to the Director or pay off creditors etc?

 

[Dobbollah]

How was the BBL spent, was it paid in dividends to the Director or pay off creditors etc?

It paid off a creditor and kept the business afloat paying bills.

No dividends or salaries were paid...ie...no personal gain.

 

[Ian J]

Banks with an unsecured lend have the same rights as any creditor...

Banks lending unsecured - whatever next

 

[Mr D]

If the bank objects to the companies closure, I assume when the time comes there's still a requirement to file company accounts at the relevant time.....

At that point do you show the company dormant?

How can a company with no money afford to file accounts?

 

[Mr D]

It paid off a creditor and kept the business afloat paying bills.

No dividends or salaries were paid...ie...no personal gain.

Was that creditor preferred over other creditors or was the loan money spread pro rata between creditors?

 

[Dobbollah]

Was that creditor preferred over other creditors or was the loan money spread pro rata between creditors?

Our only creditors are the bank for the bbl, and a utility supplier, at the time of the bbl the utility company debt hadn't accrued.

So at the time, it was the only creditor and this took place a year ago.

Since then it's been a case of trying to keep things going until it became impossible.

The business was serviced accommodation, and the landlord did not renew our lease so we had zero income and the cost to set up new was not affordable. At the time e of taking the loan we thought we'd only have to ride it out for a couple of months...a year later.....

 

[allain]

Hi Dobbollah, Can you please update what happened with your company, i am in the same situation, and looking for find a Insolvency practitioner.
Thanks

 

[Dobbollah]

At the minute I've sent letters off as per the spongebob plan and I going down that route.

An insolvency practitioner wasn't do able for me, I was getting quotes for £4000 plus and that's not possible for me.

 

[Dobbollah]

Thought I'd update as it's been a while, followed the plan, sent letters with the closure notice, an objection was put in and it was rejected.

6 months on, I put another closure in, and it was rejected the very moment the application was submitted, not sure how that works but that's where I am.

 

[ChrisCallaghan]

Thought I'd update as it's been a while, followed the plan, sent letters with the closure notice, an objection was put in and it was rejected.

6 months on, I put another closure in, and it was rejected the very moment the application was submitted, not sure how that works but that's where I am.

Hello @Dobbollah ,

Short answer is stick to the SpongeBob plan. It is standard practice for BBL lenders to object to a strike off applications, and to continue to object.

Sooner or later either the bank will stop objecting, or (and more likely) they'll take action to force the company into liquidation through the courts.

In short all you can do now is sit back and wait. Waiting for a creditor, like the bank, to wind up your company is all part of the SpongeBob plan. The only alternative is to instruct an IP for a voluntary liquidation, but as you know that can cost between £3,000 - £4,000.

 

[Dobbollah]

I appreciate the advice thank you.

What happens when it would be time to complete tax returns, I guess as far as hmrc are concerned they will want a return won't they

 

[ChrisCallaghan]

I appreciate the advice thank you.

What happens when it would be time to complete tax returns, I guess as far as hmrc are concerned they will want a return won't they

Personally my advice is not to bother. At this stage there is no point.

 

[Elliot Green]

I appreciate the advice thank you.

What happens when it would be time to complete tax returns, I guess as far as hmrc are concerned they will want a return won't they

If a return is not submitted then chances are HMRC will eventually raise as assessment and in time the company will be wound up by HMRC and if so you would be called upon to attend the Official Receiver who would act as the Liquidator.

 

[Lisa Thomas]

That depends entirely on how much HMRC's assessment is, Elliot and even then it isn't a certainty.

Your post implies winding up is guaranteed, rather than the small, unlikely outcome it actually is.

 

[Elliot Green]

That depends entirely on how much HMRC's assessment is, Elliot and even then it isn't guaranteed.

Your post implies winding up is guaranteed, rather than the small, unlikely outcome it actually is.

Lisa come next April when the rate is expected to drop back down again it becomes ever more likely that a petition could arise. As always it depends on the facts of the case.

 

[ChrisCallaghan]

That depends entirely on how much HMRC's assessment is, Elliot and even then it isn't guaranteed.

Your post implies winding up is guaranteed, rather than the small, unlikely outcome it actually is.

From my experience I agree it is unlikely that HMRC would wind in this case. The more likely outcome, at least in my opinion, is that the BBL lender will take action to wind, or they will cease objecting and the dissolution goes through.

@Dobbollah either way there is no need now to worry about filing company tax returns. We are all still waiting to see how BBL lenders are going to treat cases like yours - whether they will cease objecting and let strike off/dissolution applications to go through OR take action through the courts to wind up companies. We'd all be very grateful if you could keep us updated. But for now, stick the SpongeBob plan, and I hope you get a positive outcome soon.

 

[Elliot Green]

From my experience I agree it is unlikely that HMRC would wind in this case. The more likely outcome, at least in my opinion, is that the BBL lender will take action to wind, or they will cease objecting and the dissolution goes through.

@Dobbollah either way there is no need now to worry about filing company tax returns. We are all still waiting to see how BBL lenders are going to treat cases like yours - whether they will cease objecting and let strike off/dissolution applications to go through OR take action through the courts to wind up companies. We'd all be very grateful if you could keep us updated. But for now, stick the SpongeBob plan, and I hope you get a positive outcome soon.

At the moment we do not know what will happen as the approach of HMRC simply remains to be seen.

 

[ChrisCallaghan]

At the moment we do not know what will happen as the approach of HMRC simply remains to be seen.

It certainly does remain to be seen @Elliot Green . It would, of course, be beneficial for @Dobbollah if HMRC came forward to wind up her company. I'm sure she will keep us posted.

 

[Lisa Thomas]

Lisa come next April when the rate is expected to drop back down again it becomes ever more likely that a petition could arise. As always it depends on the facts of the case.

I doubt HMRC are going to liquidate a company based on an assessment for non filed returns. I think the chances are slim.

 

[chickenanddumplings]

Hi everyone. I wasn't sure if I should start a new thread or just piggyback on this one however I'm basically asking the same thing.

I have a small business that is insolvent and I'm not sure how to proceed. I have two creditors, my office rent and HMRC.

I don't have enough money to hire an insolvency practitioner as I spent what I had to pay off the rest of my suppliers (for my own conscience more than anything)

I've seen other responses on here about the Spongebob Plan and that is what I was going to do, but I read online that companies cannot currently send winding up petitions for debts relating to rent arrears brought about by Covid (which ours definitely was)

So I'm just wondering where that leaves me in terms of the Spongebob? I've not been trading for months other than paying off debts and collecting old invoices so technically I could write to the creditors and apply for the company to be stricken off tomorrow. The Spongebob says the application to strike off is optional... but it seems to my (untrained) eyed that the best thing to do is just do both at the same time and get the ball rolling rather than wait for a winding-up petition that will never come?

Any advice would be greatly appreciated as I just want to get this sorted as painlessly as possible!

 

[ChrisCallaghan]

Hello, and I'm sorry about the position you find yourself in.

The SpongeBob method is still the gold standard in my opinion when it comes to closing a company, where there are no funds left to instruct a liquidator.

You are quite right about landlords not being able to issue petitions at the moment due to Covid, and this protection is in place till end of March 2022 I believe. That being said, landlords are not typically the type of creditor to take such action, especially if you have already vacated the premise, as they have nothing to gain.

With that in mind I would say HMRC are the more likely creditor to take winding up action. How much do you currently owe them?

The Spongebob says the application to strike off is optional... but it seems to my (untrained) eyed that the best thing to do is just do both at the same time and get the ball rolling rather than wait for a winding-up petition that will never come?

Opinions differ on this question, but personally I think, based on your creditors, that applying for strike off would be sensible. If anything it may encourage a creditor like HMRC to take winding up action.

 

[chickenanddumplings]

You are quite right about landlords not being able to issue petitions at the moment due to Covid, and this protection is in place till end of March 2022 I believe. That being said, landlords are not typically the type of creditor to take such action, especially if you have already vacated the premise, as they have nothing to gain.

With that in mind I would say HMRC are the more likely creditor to take winding up action. How much do you currently owe them?

Thanks for your quick response. Yes in terms of the landlord they have instructed their solicitors to send a letter before action saying we owe them £40k. However this is due to a miscommunication - we vacated the property and gave back the keys over a year ago and were under the impression we had surrendered the lease, however it turns out they want the liquidator to disclaim the lease and have been quietly charging us rent for almost 18 months.

As for HMRC we owe approx £20k. We were in the process of setting up a time to pay agreement back just before everything locked down and trade fell off a cliff.

I was hoping to ride it out until the pandemic finished but combined with Brexit it's just not been possible.

 

[ChrisCallaghan]

I think given the amount owed to HMRC that an objection to a voluntary strike is likely, but I don't think there's any harm in attempting it.

 

[chickenanddumplings]

I think given the amount owed to HMRC that an objection to a voluntary strike is likely, but I don't think there's any harm in attempting it.

Sorry for so many questions but a voluntary strike is done by submitting a DS01 form?

 

[ChrisCallaghan]

Sorry for so many questions but a voluntary strike is done by submitting a DS01 form?

No apologies needed! Yes it's the DS01. Please see the below for the full guidance:

https://www.gov.uk/strike-off-your-company-from-companies-register/apply-to-strike-off

 

[chickenanddumplings]

thanks again for your reply. And just one more question (I hope) should I still use the Spongebob template to reply to the solicitor? I got a letter before action asking for a response by the 28th. I wasn't sure if I should just use the template or if I should tell them that I am applying for a voluntary strike off based on the fact they can't try to wind up the company?

 

[Chris Ashdown]

Have you told all suppliers that you have ceased trading by letter, that should have been your first step

Also as you paid other creditors in preference to the landlord they can hold that against you

The landlord is entitled to charge rent up to the end of the lease regardless of handing back the keys, unless he lets the building to another company or person in the meantime

 

[ChrisCallaghan]

you will still have to pay that 20k back

Based on what, exactly, do you say that? The £20k is a HMRC debt in the company's name. This is not a personally guaranteed debt.

Are you assuming there may be an overdrawn director's loan account?

 

[Newchodge]

Based on what, exactly, do you say that? The £20k is a HMRC debt in the company's name. This is not a personally guaranteed debt.

Are you assuming there may be an overdrawn director's loan account?

No, they are trying to get their post count up. Ignore them.

 

[ChrisCallaghan]

No, they are trying to get their post count up. Ignore them.

Thanks @Newchodge . I had a look at their recent activity after I posted and thought similar.

 

[achilles01]

Hi @Dobbollah , I am in a similar situation as you, can you please update us where you are with the dissolution process?

 

[Dobbollah]

Just to update, no change no change, still blocked from closing ourselves and not being wound up either

 

[Mr D]

Thanks for your quick response. Yes in terms of the landlord they have instructed their solicitors to send a letter before action saying we owe them £40k. However this is due to a miscommunication - we vacated the property and gave back the keys over a year ago and were under the impression we had surrendered the lease, however it turns out they want the liquidator to disclaim the lease and have been quietly charging us rent for almost 18 months.

As for HMRC we owe approx £20k. We were in the process of setting up a time to pay agreement back just before everything locked down and trade fell off a cliff.

I was hoping to ride it out until the pandemic finished but combined with Brexit it's just not been possible.

Your landlord would normally charge rent until next break clause in your lease or the end of the lease. As is likely you agreed in the lease. Vacating the premises does not stop that.

Do you have a personal guarantee on the lease? If not then the company owes the landlord. If there is a personal guarantee then you will be chased for the debt personally, as agreed.

 

[Dobbollah]

From my experience I agree it is unlikely that HMRC would wind in this case. The more likely outcome, at least in my opinion, is that the BBL lender will take action to wind, or they will cease objecting and the dissolution goes through.

@Dobbollah either way there is no need now to worry about filing company tax returns. We are all still waiting to see how BBL lenders are going to treat cases like yours - whether they will cease objecting and let strike off/dissolution applications to go through OR take action through the courts to wind up companies. We'd all be very grateful if you could keep us updated. But for now, stick the SpongeBob plan, and I hope you get a positive outcome soon.

Could I just ask for a bit of clarity around filing tax returns, if a tax return is not filed, wont hmrc issue a personal fine...?