I'm thinking of closing up

[ineedadollar]

I've had this business for nearly 6 years and I think its time to throw in the towel. I been considering for a while as we are a city centre location in a city that is on its deathbed.
I have pivoted multiple times and had things going well and was close to renewing my lease. (I had come to an agreement with my landlord and they didnt send out the paperwork then tried to change the terms of the deal) but the past 6 months hasn't been as expected. and now we can't source one of the products anymore and the alternatives are just not as good.

I have never properly closed down a business so I have no clue on the process.
My next quarter of rent is due.
I owe business rates money (on a payment plan)
& have a bounce back loan I was planning on spending on marketing and a refurb but honestly I don't see the point as i no longer see a future here
We have enough money in the bank to pay 2 of the 3

I'm not in a massive rush and none of them are chasing me for money and can run the business for another 6 months while still getting some sort of wages but then im not sure if i will have the money to pay off any of them.

Could really do with some advice on what's the process of closing down a business and what's the best way to go about it

 

[ChrisCallaghan]

Hi @ineedadollar ,

I'm sorry to hear things haven't gone as well as hoped for your business.

Can I ask how your business is set up? For example, a limited (Ltd) company? Sole trader?

 

[ineedadollar]

Hi @ineedadollar ,

I'm sorry to hear things haven't gone as well as hoped for your business.

Can I ask how your business is set up? For example, a limited (Ltd) company? Sole trader?

It's a limited company.

 

[ChrisCallaghan]

It's a limited company.

Thanks.

If you do ultimately decide to close your company, and there are insufficient funds to clear the debts, you're effectively left with two options - liquidate the company or attempt to dissolve your company at Companies House.

The second option is often referred to as the Spongebob Plan on this forum. See the below link to Spongebob's guide:

CLOSING A LIMITED COMPANY WTH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER

CLOSING AN INSOLVENT LIMITED COMPANY WITH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER If a company is unable to carry on trading due to becoming insolvent the standard procedure for closing it down is for the directors to appoint an Insolvency Practitioner to liquidate it...

www.ukbusinessforums.co.uk

Unfortunately this guide was written pre Covid, and does not take BBLs into consideration. Currently it seems to be taking 18 - 24 months for a dissolution to go through where there is an outstanding BBL. Sadly BBL lenders are not coming forward to wind up companies.

The alternative would be to consider closing the company through a liquidation. This would involve you instructing a firm of licensed insolvency practitioners to formally wind down your company, to deal with any assets and your company's creditors.

This is something myself and the firm I work for can help with. I'm sure the other insolvency regulars here will also be a long shortly.

I'm currently away from work till Thurs 5th Jan, but I would be happy to offer a free phone or Zoom consultation to talk through the ins and outs of your options to close your company.

 

[Elliot Green]

One solution might be what is called Creditors' Voluntary Liquidation to close down the business and undertake an orderly winding up. We can help you with that.

Liquidation is a formal process that is done in accordance with the company's articles and legislation. The intended Liquidator will usually do most of the legwork for you as part of the instruction such as notifying creditors, preparing financial reports, doing notices, drafting the advertisement to be published etc.

 

[WaveJumper]

Very sorry to hear of the situation you find yourself in. I am no expert on closing down companies and you have had some excellent advice already above, but what i would say is take control of your affairs now whilst you are in the driving seat, six months up the road and matters could be very different.

Some battles are worth fighting, but knowing when to re-treat in an orderly & organised manner has to be less stressful and far better to keep one's sanity. I really do wish you the best of luck

 

[Frank Wessely]

I've had this business for nearly 6 years and I think its time to throw in the towel. I been considering for a while as we are a city centre location in a city that is on its deathbed.
I have pivoted multiple times and had things going well and was close to renewing my lease. (I had come to an agreement with my landlord and they didnt send out the paperwork then tried to change the terms of the deal) but the past 6 months hasn't been as expected. and now we can't source one of the products anymore and the alternatives are just not as good.

I have never properly closed down a business so I have no clue on the process.
My next quarter of rent is due.
I owe business rates money (on a payment plan)
& have a bounce back loan I was planning on spending on marketing and a refurb but honestly I don't see the point as i no longer see a future here
We have enough money in the bank to pay 2 of the 3

I'm not in a massive rush and none of them are chasing me for money and can run the business for another 6 months while still getting some sort of wages but then im not sure if i will have the money to pay off any of them.

Could really do with some advice on what's the process of closing down a business and what's the best way to go about it

Hi ineedadollar

Sorry to read that you find yourself in these difficult circumstances.

The previous comments highlight a likely option however you have time on your side to an extent, given the creditors are not currently exerting any significant pressure. That being said, you have recognised that the company has no long term future, is insolvent and requires closure. This means that you need to prioritise the interests of creditors above shareholders and to ensure that you take ALL necessary steps to avoid any further deterioration in the company’s finances. Failing to do this could be a red flag for an IP in the event of a formal insolvency.

With this in mind I suggest that you take a step back, take appropriate advice for which there should be no initial charge, and understand firstly what options there are for the business and secondly and more importantly, what your personal options are post the closure of this company. These are high level conversations which I always encourage on an exploratory basis. Drilling down into the detail can follow on afterwards.

I hope that this helps.

Thanks.

 

[ineedadollar]

Thanks.

If you do ultimately decide to close your company, and there are insufficient funds to clear the debts, you're effectively left with two options - liquidate the company or attempt to dissolve your company at Companies House.

The second option is often referred to as the Spongebob Plan on this forum. See the below link to Spongebob's guide:

CLOSING A LIMITED COMPANY WTH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER

CLOSING AN INSOLVENT LIMITED COMPANY WITH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER If a company is unable to carry on trading due to becoming insolvent the standard procedure for closing it down is for the directors to appoint an Insolvency Practitioner to liquidate it...

www.ukbusinessforums.co.uk

Unfortunately this guide was written pre Covid, and does not take BBLs into consideration. Currently it seems to be taking 18 - 24 months for a dissolution to go through where there is an outstanding BBL. Sadly BBL lenders are not coming forward to wind up companies.

The alternative would be to consider closing the company through a liquidation. This would involve you instructing a firm of licensed insolvency practitioners to formally wind down your company, to deal with any assets and your company's creditors.

This is something myself and the firm I work for can help with. I'm sure the other insolvency regulars here will also be a long shortly.

I'm currently away from work till Thurs 5th Jan, but I would be happy to offer a free phone or Zoom consultation to talk through the ins and outs of your options to close your company.

Thanks for this this seems suitable for a company of my size
All my debts are mid 4 figures so not massive enough to appoint a liquidator

 

[ChrisCallaghan]

You're welcome, but I would echo what @Frank Wessely has said. Before you decide which way to go, as a director it would be a good idea to take more detailed advice from a professional. Initial advice from a professional, like myself, Frank or Elliot, is free of charge and of no obligation.

 

[Elliot Green]

I've had this business for nearly 6 years and I think its time to throw in the towel. I been considering for a while as we are a city centre location in a city that is on its deathbed.
I have pivoted multiple times and had things going well and was close to renewing my lease. (I had come to an agreement with my landlord and they didnt send out the paperwork then tried to change the terms of the deal) but the past 6 months hasn't been as expected. and now we can't source one of the products anymore and the alternatives are just not as good.

I have never properly closed down a business so I have no clue on the process.
My next quarter of rent is due.
I owe business rates money (on a payment plan)
& have a bounce back loan I was planning on spending on marketing and a refurb but honestly I don't see the point as i no longer see a future here
We have enough money in the bank to pay 2 of the 3

I'm not in a massive rush and none of them are chasing me for money and can run the business for another 6 months while still getting some sort of wages but then im not sure if i will have the money to pay off any of them.

Could really do with some advice on what's the process of closing down a business and what's the best way to go about it

In general terms, it is important that a Director does not trade on simply because the creditors have not started beating down on the door for their money. A creditor's forbearance is not a waiver of liability. A creditor that does not chase is still a creditor, as is a creditor that may not act with perceived restraint through enforcing their legal rights to the limit. That means the decisions a Director has to consider must take adequate account of creditors as a whole. A further deterioration in trading when Liquidation is not merely a foreseeable possibility but largely inevitable can cause the problem of Wrongful Trading to sprout. This *can* give rise to the risk of some personal liability for a Director for the period of Wrongful Trading. Once the company is insolvent the interests of creditors largely outflank those of the shareholders.

This is known as the 'creditor duty' which was recently considered in detail and then confirmed in the Supreme Court's 'Sequana' decision. In the press release of that decision, the following was said:

"Where the company is insolvent, or bordering on insolvency, but is not faced with an inevitable insolvent liquidation or administration, the directors should consider the interests of creditors, balancing them against the interests of shareholders where they may conflict. The greater the company’s financial difficulties, the more the directors should prioritise the interests of creditors ..."

 

[Lisa Thomas]

Best to take advice from a licensed IP.

I'd be happy to give you some initial advice for free (and I'm sure the other IP's on here would too).

We can explore all options, not just insolvency procedures, and work out which one is best for the company.

 

[ineedadollar]

You're welcome, but I would echo what @Frank Wessely has said. Before you decide which way to go, as a director it would be a good idea to take more detailed advice from a professional. Initial advice from a professional, like myself, Frank or Elliot, is free of charge and of no obligation.

sorry for the late reply been trying to have a break from thinking about it for a few days. Im going to speak to my accountant this week and see what his views are