Closing down a LTD Company with assets & debts - advice please

[deksawyer]

Hi

my company, of which I'm the sole director has been struggling for the past year - I've only been able to keep it afloat by paying myself a pittance in that time. There is also one full time member of staff. We are currently still trading, but I know that time is running short.

Currently, we have approx £20k worth of stock (that is trade prices) and approx £8k worth of creditor debts, plus a BBL loan of approx £2800 that we cannot pay. We will have all the usual monthly outgoings like rent, utilities, insurance, pension, etc etc. Accounts are in the black now, but will be in overdraft once I have paid the wages later today. Incidentally, the £8k debt is almost exactly the shortfall in the December trading figures. It was a bad year end for us.

I'm looking for advice on how to proceed with the most preferable way for me to wind the company down as I can no longer take the financial hit on a personal level.

Do I try a "closing down sale" to try and cover the current debt and other liabilities, and then declare insolvency? That could take a while I guess....

Many thanks

D.

 

[Frank Wessely]

Hi @deksawyer

If it is possible to sell the stock and pay off all of the debts so that there is a residual net cash balance in the business that would be preferable as you would avoid the professional costs and necessity of a liquidation. In so doing it is essential to preserve cash and stop incurring non-essential costs. But you need to be confident and realistic that this is achievable.

In working out the liabilities you will need to include the employee entitlements of your staff member - redundancy, holiday pay, pay in lieu of notice etc. Also there could be a claim from the landlord for the unexpired term of the lease and possibly dilapidations as well.

Do you owe the company anything under a DLA? How much are HMRC owed? These are a few of the initial questions arising.

Taking into account the bank overdraft as well it looks as though things will be very tight.

You should also prepare a prudent short term weekly cashflow for the business running through to the settlement of all liabilities, so that this can be a road map for you.

If it will help I am happy to have an exploratory call with you to discuss the way forward and run through the options so that you can make an informed decision; there is no charge for this. My contact details are below.

Thanks.

 

[Lisa Thomas]

Hello

Think carefully about how will you pay for insolvency if you have sold all the assets and used the funds to clear some of the liabilities. Amongst other things, if the employees are owed redundancy this could cause a problem if you can't afford to liquidate the company.

Your company is currently insolvent. Best to speak to an Insolvency Practitioner and take proper advice on the options to ensure you do not inadvertently commit misconduct that could come back to bite you personally.

Have a look here for more info:

The different options for insolvent limited companies with Covid related and other debts

In this jampacked video, I explore the following options available for insolvent limited companies: Compulsory Liquidation, Creditors Voluntary Liquidation (...

youtu.be

 

[deksawyer]

Thank you guys, I really appreciate the advice.

I'm meeting with my accountant tomorrow to seek a bit of advice from him. I'll update once I know which way we're going.

D.

 

[deksawyer]

OK, a bit more progress.

I also spoke to an IP on friday as well as my accountant, and he guided me through the steps and gave me a bit more info. He was working from the figures I gave him and it seemed straightforward enough.

However, I have since carried out a more thorough stock take and the assets I'm sitting on (which include the £8k+ of unpaid debt to suppliers) are approx now down to approx £12k.

The situation I'm unclear on is if supply creditors are rightfully and lawfully entitled to have these assets back under ROT terms (if they haven't been sold) that brings the total assets down to approx £4k.

If these assets sell at auction, for example and raise say £2k, I will be unable to pay the fees for the IP.

So where does this leave me?

I'm going round in circles here, and really appreciate any advice given.

thanks

D.

 

[Lisa Thomas]

You might just about be able to scrape together enough funds for a compulsory liquidation. c£3k needed for the court procedure.

Or speak to your IP about paying towards some of the costs personally (but note that you are not obligated to pay out of your own pocket.)

Some IPs will reduce their fees if the directors is paying towards the costs personally.

 

[Elliot Green]

Have you had the stock valued by an insolvency agent to see if you have enough to pay for a Liquidator?

 

[Gyumri]

I'm looking for advice on how to proceed with the most preferable way for me to wind the company down as I can no longer take the financial hit on a personal level.

I would return all the stock you have received from your suppliers to cut their losses as much as possible and explain to them and to your full time employee that it's clearly not working out. They may have to bite the bullet, as well as HMRC and the bank and your landlord etc.

In such a scenario just let the company die a natural death as nobody is going to spend time and money winding it up.

If the company can afford an IP at a fixed price then go down that route and your employee may be able to claim some redundancy money from the Government scheme.

You mention about not being able to take a personal hit which I assume simply means you can no longer afford to spend your time keeping the company afloat when you could be doing better and more profitable things.

 

[Frank Wessely]

Hi @deksawyer

You should put these further points to the IP that you have already consulted (who knows more about the company’s position than we do) and hopefully that will provide the necessary guidance.

Thanks.