Closing limited company with debts

[alexsmith2709]

Hi,
I know there are a million threads here about closing a company but i couldnt find one for my situation (although maybe the answer is the same).

I have a limited company, it is making profit (on paper) at the moment, but I havent been paying myself for a little while to try and build up the funds in the business to pay some/all debts. I was only paying myself a small amount anyway. I want to close the company and get a job elsewhere and I do not have the funds to pay for an IP.

I have a photocopier on a lease which has a personal guarantee, I can afford the monthly payments at the moment and im ok with continuing to pay this off personally when the company closes. I have a company overdraft that im pretty sure has a personal guarantee, so same applies I can pay this off personally when i start earning again. I also have a company credit card which i dont think has a personal guarantee but im going to try and pay this off before the company closes. The credit card is with the same bank as my current account & overdraft.

I have a bounce-back loan which, while i can afford the monthly payments at the moment, like the photocopier lease, cannot afford the lump sum payment to clear it.

There are no HMRC/VAT debts and will not be when I close the company. There are also no other supplier debts.

The business owes me just over £5000, which I have accepted I will probably lose. This is current under a director loan to the business.

Total debts would be just shy of £25,000 as things stand today.

What are my options?

Thanks

 

[Gyumri]

want to close the company and get a job elsewhere and I do not have the funds to pay for an IP.

I would do nothing except pay what your company can afford. The company is dormant so file dormant company accounts or accounts if not dormant at the end of the financial year.

An IP would be obliged to call on you to meet any personal guarantees given to secure the debts of the company.

So I would allow the company to remain as a dormant company paying off what it can afford. Write to the creditors to politely explain the position.

 

[ChrisCallaghan]

An IP would be obliged to call on you to meet any personal guarantees

Close to correct. An IP preparing a liquidation wouldn't actually call in the PGs, but would contact the creditors to inform them of the liquidation, and in turn the creditors would call in thier PGs.

@alexsmith2709

it's a tricky one. @Gyumri 's advice is certaily one way you could go if you're not in a position to cover an IP's fees for a liquidation.
Alternatively you could look to the SpongeBob guide on this forum, though that guide is no longer as effective as it was pre-Covid due to BBLs.

Out of curiosity, what sort of quotes have you had for a liquidation?

 

[alexsmith2709]

I would do nothing except pay what your company can afford. The company is dormant so file dormant company accounts or accounts if not dormant at the end of the financial year.

An IP would be obliged to call on you to meet any personal guarantees given to secure the debts of the company.

So I would allow the company to remain as a dormant company paying off what it can afford. Write to the creditors to politely explain the position.

I am still trading at the moment, but looking to get a job ASAP. I didnt think i could make the company dormant while still paying bills, or do you mean, leave the company active without trading and pay bills using personal funds, but through the business?

Close to correct. An IP preparing a liquidation wouldn't actually call in the PGs, but would contact the creditors to inform them of the liquidation, and in turn the creditors would call in thier PGs.

@alexsmith2709

it's a tricky one. @Gyumri 's advice is certaily one way you could go if you're not in a position to cover an IP's fees for a liquidation.
Alternatively you could look to the SpongeBob guide on this forum, though that guide is no longer as effective as it was pre-Covid due to BBLs.

Out of curiosity, what sort of quotes have you had for a liquidation?

I have looked at the Spongebob plan, but what makes this less effective due to BBLs?
I have not had any quotes for liquidation yet, but seeing other posts and finding out what i can, i assumed these easily reached multiple thousands which I do not have so thought there may be another option.

As i have only assumed an IP is out of reach and am exploring my options, I have not ruled out appointing an IP if it is something affordable and potentially cheaper in the long run. I am open to getting quotes.

 

[ChrisCallaghan]

I am still trading at the moment, but looking to get a job ASAP. I didnt think i could make the company dormant while still paying bills, or do you mean, leave the company active without trading and pay bills using personal funds, but through the business?

I have looked at the Spongebob plan, but what makes this less effective due to BBLs?
I have not had any quotes for liquidation yet, but seeing other posts and finding out what i can, i assumed these easily reached multiple thousands which I do not have so thought there may be another option.

As i have only assumed an IP is out of reach and am exploring my options, I have not ruled out appointing an IP if it is something affordable and potentially cheaper in the long run. I am open to getting quotes.

I'll DM you shortly our typical fee for a basic liquidation shortly, but you're not wrong in the costs involved.

The unfortunate problem with the SpongeBob plan is that it relies on creditors either letting dissolution/strike off action go through, or a creditor coming forward to wind up your company, aka force it into liquidation through the courts. I'm afraid I don't think any of the creditors you have would be willing to pay the costs involved to liquidate your company for you, and presently banks and gov are not letting companies with outstanding BBLs be dissolved.

 

[Lisa Thomas]

I agree with Chris - If the company can't afford Liquidation (and you are not able to willing to personally find it) , you may find your only option is to try and dissolve the company, where it will likely be in limbo for some time (with the small risk that the Insolvency Services do an investigation later down the line post dissolution).

More info here:

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

You can liquidate via court for c£3k. A voluntary liquidation starts at around £5-6k plus VAT. Often the VAT can be reclaimed.

 

[alexsmith2709]

Thank Chris & Lisa. I think this helps me make a decision and I may be in touch with one/both of you in the future if needed.

 

[Blood Lust]

Hi,
I know there are a million threads here about closing a company but i couldnt find one for my situation (although maybe the answer is the same).

I have a limited company, it is making profit (on paper) at the moment, but I havent been paying myself for a little while to try and build up the funds in the business to pay some/all debts. I was only paying myself a small amount anyway. I want to close the company and get a job elsewhere and I do not have the funds to pay for an IP.

I have a photocopier on a lease which has a personal guarantee, I can afford the monthly payments at the moment and im ok with continuing to pay this off personally when the company closes. I have a company overdraft that im pretty sure has a personal guarantee, so same applies I can pay this off personally when i start earning again. I also have a company credit card which i dont think has a personal guarantee but im going to try and pay this off before the company closes. The credit card is with the same bank as my current account & overdraft.

I have a bounce-back loan which, while i can afford the monthly payments at the moment, like the photocopier lease, cannot afford the lump sum payment to clear it.

There are no HMRC/VAT debts and will not be when I close the company. There are also no other supplier debts.

The business owes me just over £5000, which I have accepted I will probably lose. This is current under a director loan to the business.

Total debts would be just shy of £25,000 as things stand today.

What are my options?

Thanks

Pay yourself, only pay off what you are personally liable for, sell all assets to yourself for £1.

Do not pay to wind the company up, let one of your suppliers do it.

 

[ChrisCallaghan]

sell all assets to yourself for £1.

Don't do this. ??‍

If you do, and a creditor actually comes forward to wind up your company, you'll be facing a misfeasence claim, held personally liable up to the value of the assets and likely facing a directors ban courtesy of the Insolvency Service.

 

[Ian J]

Pay yourself, only pay off what you are personally liable for, sell all assets to yourself for £1.

Very dangerous advice

 

[alexsmith2709]

Don't do this. ??‍

If you do, and a creditor actually comes forward to wind up your company, you'll be facing a misfeasence claim, held personally liable up to the value of the assets and likely facing a directors ban courtesy of the Insolvency Service.

Definitely not something i was planning on doing.
I believe I can sell assets to myself as long as they are valued correctly though right? This can be before and/or after liquidation has started?

 

[ChrisCallaghan]

Definitely not something i was planning on doing.
I believe I can sell assets to myself as long as they are valued correctly though right? This can be before and/or after liquidation has started?

That's broadly correct yes. If you are going ahead with a liquidation, the liquidator can sell the assets to you. If you are paying for the liquidation from personal funds, this will go towards the purchase of any assets you wish to keep.

If you are not going ahead with a liquidation, you can personally buy them out of the company, so long as you pair fair value for them, and then leave the funds in the company for the creditors.

 

[alexsmith2709]

That's broadly correct yes. If you are going ahead with a liquidation, the liquidator can sell the assets to you. If you are paying for the liquidation from personal funds, this will go towards the purchase of any assets you wish to keep.

If you are not going ahead with a liquidation, you can personally buy them out of the company, so long as you pair fair value for them, and then leave the funds in the company for the creditors.

Great. Thanks for the clear answer. I wasnt aware the a personal payment towards liquidation could go towards the assets I wish to keep.

 

[ChrisCallaghan]

Great. Thanks for the clear answer. I wasnt aware the a personal payment towards liquidation could go towards the assets I wish to keep.

The liquidator (e.g. the firm I work for or @Lisa Thomas ) would have the assets independently valued. If there are worth less then what you have personally contributed towards the fee for the liquidation, you won't have to pay anything further to keep the assets.

 

[HasLTD]

Hello, I was wondering what would happen to my active companies if I was barred after my liquidation. Will I be able to be their director and just not be able to register new ones for the term of my disqualification. Or will i need to transfer all my active companies onto another individual in the conpany?

Kind Regards

 

[ChrisCallaghan]

If you disqualified as a director, you will have to resign from any other company that you are presently a director of.

Are you going through a liquidation presently? How far into the process are you?

 

[HasLTD]

If you disqualified as a director, you will have to resign from any other company that you are presently a director of.

Are you going through a liquidation presently? How far into the process are you?

Currently at stage 3, Waiting for the broad meeting.

 

[Lisa Thomas]

Can I ask why you think you will be barred?

 

[HasLTD]

Can I ask why you think you will be barred?

It was my first business and I didnt have the knowledge to run it properly. I had the company when I was 24 and Its been a learning curve. Im trying to think of all outcomes and aspects of the process.

 

[UK Contractor Accountant]

if I was barred after my liquidation. Will I be able to be their director

in short no.

Nor can you front someone up to be a Director whilst still running the company in the background.

 

[eteb3]

But you can if you have the Court’s permission.

Not sure how that’s granted or how often but I’m sure others on here will.

If you really have learned on the way you may not be barred anyway? Can you show your other companies are better run?

 

[Lisa Thomas]

It was my first business and I didnt have the knowledge to run it properly. I had the company when I was 24 and Its been a learning curve. Im trying to think of all outcomes and aspects of the process.

That doesn't mean you have committed any offense worth disqualifying you for.

Have a look here (about 13 minutes in) for an idea of the types of claims liquidators will report for misconduct:

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