Closing Ltd Company - when to implement SpongeBob plan?

[smo]

I am closing my Ltd company, we have some current debts and won't be able to pay for an IP to wrap things up so I'm thinking of using the spongebob plan.

We are half way through a 5 year lease with the break clause been and gone so no "exit" as such, my landlord is considering 3 months rent + me paying for the instruction of a letting agent so about £4,800 inc VAT

The finances are as follows:

Trade Creditors: £4492
Lease exit £4800
VAT £3600 (just finished vat quarter 31st jan)
Paye £3442 - not sure how we fell so far behind on this
Estimated corp tax £900 as our y/e was 31st jan as well.

We have money in the bank but about 2k less than the totals above. What do I pay if any of it? My feeling is to pay my "creditors" as in my suppliers and then implement spongebob plan and let the rest fight it out. There are no personal guarantees on anything and assets of the business total about £500 total.

I might have a buyer for the goodwill/assets but that's only going to realise £500 as above.

What do I do to exit this with the least amount of fuss and grief to all involved?

 

[Chrismckay]

Sounds like you have about £10,000 or so in the bank which should be enough to instruct an IP. He will be able to deal with lease.

 

[Bob]

Provided you don't have a PG on the lease, I would agree with @Chrismckay . An IP should be around £5K and if you can afford it, don't have an overdrawn director's loan and haven't paid illegal dividends, it is by far the cleaner method. Everyone gets less - particularly the landlord but you get a clean break and can't be in trouble for preferring creditors.

 

[smo]

Would I not be better to clear as much as possible rather than wasting money on an IP?

 

[Chrismckay]

There is always a lot to consider when closing a company down. Most IPs will offer a free meeting and go through the pitfalls before you have to sign up.

 

[Bob]

Using an IP is probably worthwhile if you can afford it. Otherwise how do you decide whom to pay? What about the ones you don't pay? Do you have an accountant. Probably worth talking to him about it. He will know a local IP and has been said, they will probably discuss your options FOC.

 

[Chrismckay]

Would I not be better to clear as much as possible rather than wasting money on an IP?

You could do more harm than good.

 

[Bob]

Just noticed that @Chrismckay is an IP so it's worth taking his advice. He can maybe say whether my cost estimate is reasonable

 

[smo]

The thing about an IP is, I owe about 15k and have nearly enough to cover it all, if I employ an IP then i spank 5k on them and no one gets anything like what they would have.....and of course an IP is going to suggest using one, just like any professional would recommend using "one of their own" to solve a specific problem.

Also I want this wiped out without anything on my record as a director so want to avoid the official insolvency route if I can.

 

[Bob]

At the end of the day, it is your choice. If you could repay all the debts then you wouldn't need an IP. Again I would go to your own accountant first for his advice knowing the full details of you business. How long is the lease. What is the potential exposure?

 

[smo]

I spoke to my accountant earlier, he said i could essentially do the spongebob plan, pay what i can and close up shop and apply to strike and see what happens but its not his preferred option!

The lease is 5 years, we're 2.5 years in with 30k left to pay in total but he cant have what we havent got!!!

 

[Bob]

The lease is 5 years, we're 2.5 years in with 30k left to pay in total but he cant have what we havent got!!!

Exactly why an IP would be my favoured option on the information you have given. We used to have a local firm that we knew well and they knew well that they needed to look after our clients if they wanted repeat business

 

[Chrismckay]

As an IP we seem to get a bad press on here - but the issues in this thread are the reason we and the insolvency regime exist. The Insolvency Act is there to provide a means of dealing with insolvent businesses in a way that is fair to creditors generally, provides a way to wrap up the business and allow the directors to pass the problem onto professionals.

 

[smo]

As an IP we seem to get a bad press on here - but the issues in this thread are the reason we and the insolvency regime exist. The Insolvency Act is there to provide a means of dealing with insolvent businesses in a way that is fair to creditors generally, provides a way to wrap up the business and allow the directors to pass the problem onto professionals.

This all seems great, but the bad press comes from the huge fees taken up front essentially meaning creditors get even less - everyone wants to be paid but something like £5,000 or more for the equivalent of a few weeks work at tops???

 

[kulture]

Is it fair to say that strictly speaking the £4800 to the landlord is not yet a debt? It is a way of buying out of future liability. So taking that out of the equation, you can pay all your creditors in full (and thus not favour any) and then do the spongebob. The landlord will get whatever is left.

 

[SamStones]

Is it fair to say that strictly speaking the £4800 to the landlord is not yet a debt? It is a way of buying out of future liability. So taking that out of the equation, you can pay all your creditors in full (and thus not favour any) and then do the spongebob. The landlord will get whatever is left.

Seems reasonable to me! Just make sure there's no overdrawn d/l account or pg on the lease and this sounds like it solves all your problems.

 

[Spongebob]

The Spongebob Plan is intended specifically for insolvent companies where there are insufficient realisable assets to appoint an IP without the director digging his hand into his own pocket.

This is clearly not the case here. There is a healthy credit balance in the company bank account. Therefore smo should forget all about the Spongebob Plan and appoint an IP without delay.

He has made no mention of a Personal Guarantee to the landlord so we must assume that there is none.

 

[smo]

Hi Everyone!

I've consulted an IP (and was pleasantly surprised.....I expected to be judged for some reason but wasn't at all!) anyways, an IP is going to be appointed at the end of this month to wrap it all up.

Thanks for the help and advice

 

[Bob]

Wise decision