Disolve or liquidation?

[Ron Jambo]

We have a ltd company with 2 shareholders/directors. Unfortunately over the last year work has really quietened down. Also the other shareholder/director would like to leave the company for new ventures. This would leave us in a position where the business could no longer carry on.

We have no debt and no overdrawn directors accounts. we didn't take any bounce back loans. All vat bills would be paid as would Cox.

The only thing we wouldnt have enough money for is to terminate our telecoms contract which has 7 years left.

(they are completely unreasonable and not budging)

Would we require liquidators purely for this reason?

Thanks.

 

[ChrisCallaghan]

Hello Ron,

You could certainly attempt to dissolve and see how you get on. You have an obligation to notify the telecom company if you do apply to dissolve, and then you'll have to wait to see if they lodge an objection. You will also have to cease to trade 3 months before you make the application.

If you wanted certainty, then liquidation would be the way to go. Likewise if you attempt to dissolve and the telecoms company objects, then may be the time to consider liquidation.

If you would like free advice on the liquidation process, myself or any of the insolvency regulars here on UKBF would be happy to offer you a confidential consultation.

 

[Ron Jambo]

Thanks for the reply Chris.
Would a telecoms company normally object?

As we would have to cease trading for 3 months then their direct debits would stop. As long as they got their phone equipment back and we weren't in any arrears all they would be losing was the remainder of the contract clause?

Would that really warrant the hassle of an objection?

Liquidation would be a lot of hassle purely for the above.

 

[ChrisCallaghan]

Liquidation would be a lot of hassle purely for the above.

I completely agree. Unfortunately I've had a couple of clients in the past who've ended up liquidating for this very reason.

With any luck your telecoms provider will see sense, but I have known these types of companies object to dissolution before where there's time left on a contract. Personally if I was in your position, I'd attempt to dissolve and see if it goes through. If they object you can always revisit liquidation.

 

[Ron Jambo]

What would the view be if it did end up going to the liquidators and the directors had paid a small dividend when closing the account/cease trading when that money could have gone towards the telecom company?

I might be sounding over the top/worrying over nothing but we've always done everything by the book.

Telecoms was never really thought of as a creditor as apposed to actually owing someone money.

 

[Gyumri]

What would the view be if it did end up going to the liquidators and the directors had paid a small dividend when closing the account/cease trading when that money could have gone towards the telecom company?

There is no need for a liquidator in your position as a liquidator would only say that you shouldn't have drawn a dividend when your telecom creditor was banging on the door.

You would be making a rod for your own back. If you want to file final accounts and draw your dividend from the profits then do so. If your telecoms creditor wants to serve a statutory demand with a view to winding up the company then go out and buy a bag of popcorn while they get on with it.

Of course you can write to them before applying to dissolve the company and see what they say.

 

[Ron Jambo]

Thanks Gyumri.

So basically don't tell them and see if they end up winding the company up. I can't see why they would pay for the liquidation when they wouldn't get anything from it.

How in the world do other companies happily dissolve when there must be all sorts of running contracts going on?

I'm a bit gutted it's come to this because we have always been ontop of things.

 

[ChrisCallaghan]

So basically don't tell them

If you apply to dissolve you need to tell them. The Insolvency Service seem pretty keen on giving directors bans when directors fail to notify creditors of a voluntary strike off application these days.

 

[JEREMY HAWKE]

Would the telecoms company actually go through the hassle of objecting . They are used to having Ltd companies going skint so this would be nothing new to them and I doubt if their policy on customer liquidation would impede any of your plans.
I think that they would just accept it

 

[Ron Jambo]

If you apply to dissolve you need to tell them. The Insolvency Service seem pretty keen on giving directors bans when directors fail to notify creditors of a voluntary strike off application these days.

I thought that was the case. I will let them know in writing. At what point does the notice need to be given? Before cease trading or before the application to disolve?

 

[Ron Jambo]

Would the telecoms company actually go through the hassle of objecting . They are used to having Ltd companies going skint so this would be nothing new to them and I doubt if their policy on customer liquidation would impede any of your plans.
I think that they would just accept it

Thanks Jeremy . I hope that would be the case.

 

[DWS]

You need to send copies of the DS01 to your creditors within 7 days of the application being made, I usually include a cover letter as well

 

[japancool]

Thanks Jeremy . I hope that would be the case.

Is it one of the name brand high street telecoms companies, or an independent? The latter are less likely to object.

 

[Ron Jambo]

Is it one of the name brand high street telecoms companies, or an independent? The latter are less likely to object.

It's an independent thankfully

 

[japancool]

It's an independent thankfully

I can only speak from experience - I've worked (and still work) at many independent telecoms companies, and we've had clients go bust while in-contract, and we've never objected, as far as I know. It's just not worth the time or hassle, if the company has no assets.

 

[Ron Jambo]

I can only speak from experience - I've worked (and still work) at many independent telecoms companies, and we've had clients go bust while in-contract, and we've never objected, as far as I know. It's just not worth the time or hassle, if the company has no assets.

Thanks japancool that's really good to know.

 

[Lisa Thomas]

I thought that was the case. I will let them know in writing. At what point does the notice need to be given? Before cease trading or before the application to disolve?

Procedure is detailed here:

Guidance for limited companies, partnerships and other company types

Guidance about registering, filing and disclosing information with Companies House.

www.gov.uk

 

[Solvelaw]

Aside from this, you as directors must act reasonably and properly. It is the company which will or could have issues in paying debts as they fall due and therefore a corporate insolvency specialist would be the way to go before any outcome is chosen. I would recommend Parker Andrews as I have referred many insolvency matters to them before. Better make an asset and liability list to help them out.

 

[Lisa Thomas]

Thanks for the recommendation, Solvelaw.

 

[Michael Loveridge]

Unfortunately you're in danger of being persuaded to spend money on professional advice that you simply don't need.

So the company can't pay the telecoms company - so what? There's nothing they can do about it, as they can't get blood out of a stone. And if they object to the dissolution, again, so what? It really doesn't matter to you one way or the other. The objection has a limited shelf life at Companies House, and when it expires the dissolution will just go ahead.

If you apply to dissolve you need to tell them. The Insolvency Service seem pretty keen on giving directors bans when directors fail to notify creditors of a voluntary strike off application these days.

This sounds somewhat alarmist, to put it mildly. What evidence have you got to support such an assertion? Small companies are dissolved every day without creditors being notified, and there's never any action taken to ban the directors.

Whilst it's possible the IS might get involved in a case involving very large sums of money they would never in a million years get involved over such a trivial matter as this, so why even mention it?

 

[Lisa Thomas]

I agree with the first half of Michael's reply but given directors are required to give notice to creditors, would advise you not to put too much weight on the second half. While the risk might be small, for the sake of sending one letter to the registered office, it's not worth taking any risk in not following the procedure properly.