Closing a limited company

[BubbaWY]

Good morning.

My wife and her business partner are closing their limited company. Due to a change in circumstances my wifes BP needs out and we are not in a position to buy her share and arent really bothered about doing so. Covid has knocked the stuffing out of both of them and just want rid (it is a coffee shop).

The business was all set to reopen in May when lockdown restrictions were to be relaxed but the change in circumstances meant it never reopened. We repaid the bounce back loan and all other creditors have been paid so the business owes nobody anything except the landlord who is currently owed 1 months rent. Any rent arrears will be paid from the proceeds of selling the business lease.

Once the business has been sold, what would be the easiest/cheapest way to dissolve the business? Do we need to have final accounts prepared?

 

[Gavin Bates]

Hi

This will all depend on the amount you sell the business for. If at the end of the day the net funds are more than £25,000 then it may be best to look at a solvent liquidation. If less then you may be able to get clearance from HMRC to distribute the funds to shareholders. Either way, you will need to bring your accounts up to date.

I hope this helps.

Best of luck.

Gavin

 

[ChrisCallaghan]

Agree with Gavin. Once sold, you will need to do a final set of accounts up to/past the sale date. If after all the final liabilities have been settled, if there is less than £25,000 of assets/cash left in the company you can simply dissolve/strike off the company via Companies House. You can close the company in this way yourself or with the help of an accountant. If you are left with more than £25,000 of assets/cash you may wish to consider a solvent liquidation to close your company, called a Members Voluntary Liquidation. For this you will need the help of a licensed insolvency practitioner. Most will be happy to give you advice on this process free of charge.

 

[Mr D]

Good morning.

My wife and her business partner are closing their limited company. Due to a change in circumstances my wifes BP needs out and we are not in a position to buy her share and arent really bothered about doing so. Covid has knocked the stuffing out of both of them and just want rid (it is a coffee shop).

The business was all set to reopen in May when lockdown restrictions were to be relaxed but the change in circumstances meant it never reopened. We repaid the bounce back loan and all other creditors have been paid so the business owes nobody anything except the landlord who is currently owed 1 months rent. Any rent arrears will be paid from the proceeds of selling the business lease.

Once the business has been sold, what would be the easiest/cheapest way to dissolve the business? Do we need to have final accounts prepared?

Hopefully they don't have any personal guarantee on the rent. People can end up with big bills, personally payable. Not every lease has personal guarantee on it.

If the business lease cannot be sold - then what?

 

[ChrisCallaghan]

If the business lease cannot be sold - then what?

Slightly doom and gloom, but @Mr D has a point. It would be worthwhile checking the lease for any personal guarantees in case you are unable to sell the business and lease. If you are unable to find a buyer and are left with liabilities that the company cannot afford, I would suggest coming back to this forum for further advice on closing a company with unaffordable debts.

*Edit* and also come back to this forum for advice on unaffordable personal guarantees

 

[Mr D]

Slightly doom and gloom, but @Mr D has a point. It would be worthwhile checking the lease for any personal guarantees in case you are unable to sell the business and lease. If you are unable to find a buyer and are left with liabilities that the company cannot afford, I would suggest coming back to this forum for further advice on closing a company with unaffordable debts.

*Edit* and also come back to this forum for advice on unaffordable personal guarantees

Sorry, not meant to be doom and gloom. However such things happen and people end up with potentially tens of thousands each in debt.
Not every lease has the problem, not every lease ends up much in debt before its assigned to someone else.

 

[ChrisCallaghan]

Sadly you're not wrong @Mr D ! And you're right to point it out for @BubbaWY to check. Severe personal financial difficulty can be caused where business owners have signed a personal guarantee and are unable to find someone to take on the lease. Especially if there are years left on the lease.

 

[BubbaWY]

There is a personal guarantee on the rent. We do have an offer on the business where there will be an agreement between us/the buyer so that they become responsible for the guarantee...though appreciate we are still liable to the landlord, if the buyer fails to pay the rent. I assume we would have to take subsequent action against the buyer in this instance.

With the sale of the business and any current cash holding there should be a surplus of around £20k once sale fees, final accountancy services, etc are paid.

 

[ChrisCallaghan]

Is the lease in your company's name? If so, then the company will be the landlord and you may need to keep the company open, unless the landlord is willing to change the lease over to the new owners or into your name personally.

 

[japancool]

*Edit* and also come back to this forum for advice on unaffordable personal guarantees

Just out of curiosity, what can be done about these?

 

[ChrisCallaghan]

Just out of curiosity, what can be done about these?

There are specialists who can check and challenge the legality of such personal guarantees, but more often than not it will usually be personal insolvency advice.

 

[BubbaWY]

Is the lease in your company's name? If so, then the company will be the landlord and you may need to keep the company open, unless the landlord is willing to change the lease over to the new owners or into your name personally.

The landlord will reassign the lease to the buyers.

 

[ChrisCallaghan]

The landlord will reassign the lease to the buyers.

Glad to hear it. Good luck with the sale!

 

[Mr D]

There is a personal guarantee on the rent. We do have an offer on the business where there will be an agreement between us/the buyer so that they become responsible for the guarantee...though appreciate we are still liable to the landlord, if the buyer fails to pay the rent. I assume we would have to take subsequent action against the buyer in this instance.

With the sale of the business and any current cash holding there should be a surplus of around £20k once sale fees, final accountancy services, etc are paid.

Yes sounds like you'd be taking action against them. Does not mean it will be paid, or indeed ever be payable.

Business goes under then often the person with the debt has lost their job. Zero or benefit income for a while maybe....

 

[WaveJumper]

As an aside I do hope you are taking proper legal advice on this and have someone looking over all the paper work on your behalf

 

[BubbaWY]

As an aside I do hope you are taking proper legal advice on this and have someone looking over all the paper work on your behalf

Yes. Solicitors for the paperwork (sale of the business) and it sounds like I will need my accountant to do the closing the business bit.

 

[WaveJumper]

Yes. Solicitors for the paperwork (sale of the business) and it sounds like I will need my accountant to do the closing the business bit.

Very sensible well done and hope it all gets sorted, best of luck