Liquidation/Administration help

[C.J]

Hi All

I am after a bit of advice, it would appear I will soon be the position of winding up my business. Which I am quite pleased about as it is slowly sucking the life out of me.

I just wanted to know how it works, I know I talk to an IP and we go from there, but what does it mean for me, day to day?

Do I give the keys and computer logins to the IP and go on my merry way, or, how does it work?

If I have to stay in the business, what will I be doing and how long does it take to totally be free of it?

Sorry for the depressing tone, it has given me 30 years and mostly they were good, but time to go.

Thanks

 

[ChrisCallaghan]

Hi @C.J ,

My apologies if this seems like the obvious answer, but any insolvency practice you choose to advise and assist you would answer your questions, specific to you and your company's circumstances. Myself (or any of the other insolvency regulars here on UKBF) would offer you free and confidential consultation to go through the whole process and any questions you would have. Please feel free to DM me or contact me using the details in my post signature to arrange a consultation.

Brief answers to your questions below:

I just wanted to know how it works, I know I talk to an IP and we go from there, but what does it mean for me, day to day?

In brief, that you will be placing the company into liquidation, and bringing your responsibilities as a director (e.g. dealing with creditors, filing accounts etc) to an end. Everything is situation dependant, but typically this will not affect your personal credit file or assets, nor will it typically restrict you from earning a living as best as you see fit.

Do I give the keys and computer logins to the IP and go on my merry way, or, how does it work?

Also situation dependant. If there are assets on site that the liquidator has to deal with, you may be asked to hang onto the keys for a short period. You may be asked to simply return them to the landlord. Naturally don't make any decisions until you have taken advise from the insolvency practice you choose to represent your company.

If I have to stay in the business, what will I be doing and how long does it take to totally be free of it?

Often you will cease to trade upon instructing an IP (again, situation dependant). It typically takes a few weeks to get a company into liquidation, and during that time you will be providing the IP with the information they/we require. You will not be expected to continue to trade during the time it takes to liquidate.

Hope the above helps! Happy to offer more advice on a consultation if needed.

 

[Andrew Bailey]

Hi CJ

It will depend up upon the specific circumstances of your business and strategy agreed with the IP.

In some cases where it is a straightforward shutdown of the business perhaps resulting in a liquidation then you may find that your role is mainly limited to providing information to the IP to facilitate the liquidation.

In more complicated cases where there may be lots of different stakeholders and/or different elements of the case to manage which require your knowledge and your input then you may need to be more involved.

Best to speak to an IP, understand your options and then a strategy can be put in place.

Kind regards

Andrew

 

[C.J]

Thank you for your replies, much appreciated.

 

[Lee Green]

As others have said, the answers are largely based on the circumstances of each case so there is no generic answer.

If you were to proceed down the route of Liquidation for example, instructing an IP and actually entering liquidation are two different events.

The IP firm will initially help you with the formalities of placing the company into Liquidation. They do not become Liquidators after you sign an engagement letter. You retain your statutory duties to act in the company's and creditors best interests up until the legal meeting has been held to pass the winding up resolution etc.

Once the decision to Liquidate has been made, whether the company continues trading will depend on whether it is worth doing so. If there is work in progress that, in isolation, is profitable to complete then the IP might be keen for you to complete this. However, it is not mandatory and you can always just shut the doors if that is your preference.

The process to enter liquidation is largely dependent on how long it takes for the director to deliver up all of the necessary information. But can be completed in a little over 2 weeks where the information is delivered up promptly.

Once the Company is in Liquidation then you no longer have power to deal with the company's affairs. Your day to day involvement would usually cease at this point, unless the liquidator needed to retain your service for specific matters. You are still legally required to attend on the Liquidator and respond to reasonable requests. For example, you will likely be requested to complete a director questionnaire and deliver up company books and records. But aside from those initial matters typically the directors involvement would be minimal going forwards.

Some directors (who might also be creditors) may wish to have greater involvement with assisting with recovery of book debts etc, as this might benefit them if there is more funds in the overall pot.

 

[Gavin Bates]

I can see that others have answered your questions above which all seem fair because it will always depend on each companies individual circumstances.

Kind regards

Gavin

 

[Lisa Thomas]

Hi All

I am after a bit of advice, it would appear I will soon be the position of winding up my business. Which I am quite pleased about as it is slowly sucking the life out of me.

I just wanted to know how it works, I know I talk to an IP and we go from there, but what does it mean for me, day to day?

Do I give the keys and computer logins to the IP and go on my merry way, or, how does it work?

If I have to stay in the business, what will I be doing and how long does it take to totally be free of it?

Sorry for the depressing tone, it has given me 30 years and mostly they were good, but time to go.

Thanks

You are usually required to fill in some paperwork and provide the Insolvency Practitioner with enough information to help them, help you, place it into Liquidation.

Post liquidation, your cooperation will be required as regards their statutory investigation and any queries that come out of the wash.

It's hard to say what they might be but one common example is debtor queries and disputes.

PS I'm going to take a leap and say I suspect an Administration procedure will not apply here.

 

[Frank Wessely]

Hi @CJ

My fellow IPs have outlined many of the initial points that you should consider.

The point to remember is that your discussion with an IP will not take place in a vacuum. There may be financial implications for you personally to consider depending upon the specific circumstances. And unless you are going to retire, your financial plans for the future should also form part of the overall consideration.

You have not specifically said that the company is insolvent, albeit that has been assumed from the narrative and in the above comments. If the company is solvent then the process will be simpler and less expensive.

In any event best of luck with your decisions. If I can help at all, my contact details are below.

Thanks.

 

[C.J]

Thank you all for the replies, much appreciated.

 

[pentel]

You might want to investigate the cost of an IP and liquidation, these are not cheap.

Yes they all usually offer a free initial consultation however the cost of a clean liquidation (one where you have sold all the assets and paid all the creditors so there is only cash, accounts are up to date and no lease liability) will still cost £1000's

 

[C.J]

Thanks @pentel

Does it matter though, it's not my money is it? Doesn't the cost of the liquidation come out of company funds, debtors, stock, assets etc.. or am I wrong about that?

 

[Frank Wessely]

Thanks @pentel

Does it matter though, it's not my money is it? Doesn't the cost of the liquidation come out of company funds, debtors, stock, assets etc.. or am I wrong about that?

That's correct.

Thanks.

 

[pentel]

Does it matter though, it's not my money is it? Doesn't the cost of the liquidation come out of company funds, debtors, stock, assets etc.. or am I wrong about that?

That is correct in the case of a solvent liquidation.

 

[C.J]

Who pays in an insolvent liquidation then?

 

[ChrisCallaghan]

You might want to investigate the cost of an IP and liquidation, these are not cheap.

Yes they all usually offer a free initial consultation however the cost of a clean liquidation (one where you have sold all the assets and paid all the creditors so there is only cash, accounts are up to date and no lease liability) will still cost £1000's

@pentel speaking for myself, the purpose of the consultation is first to explore all the options first. One of the options will often be for a liquidation, which I will then give a quote for. A liquidation does not have a blanket one price for all circumstances cost. You say OP should first investigate the cost of liquidation - that is part of the purpose of the consultation - to give quotations for a director to consider.

I'm relatively confident most of the IPs on this forum operate in a similar manner to myself - free advice on all the options available, and a no obligation quotation for any of our services that are suitable.

Does it matter though, it's not my money is it? Doesn't the cost of the liquidation come out of company funds, debtors, stock, assets etc.. or am I wrong about that?

That's correct.

Thanks.

That is correct in the case of a solvent liquidation.

@pentel this is also correct for insolvent liquidations. A director would only need to consider personally funding the fee if there are insufficient assets.

 

[ChrisCallaghan]

Who pays in an insolvent liquidation then?

As you have you suggested, we would first look to see if the assets (physical, cash at bank, debtors etc) hold sufficient value to cover a liquidators fee (fee dependant on level of work involved). If there is not enough value in the company's assets, then it would be up to the director, like yourself, if they would personally like to cover the fee.

 

[Lisa Thomas]

That is correct in the case of a solvent liquidation.

and an insolvent one.

 

[Lisa Thomas]

Thanks @pentel

Does it matter though, it's not my money is it? Doesn't the cost of the liquidation come out of company funds, debtors, stock, assets etc.. or am I wrong about that?

Yes the costs are usually paid for from the company's assets and approved by the creditors before they are drawn.,

 

[Elliot Green]

Hi All

I am after a bit of advice, it would appear I will soon be the position of winding up my business. Which I am quite pleased about as it is slowly sucking the life out of me.

I just wanted to know how it works, I know I talk to an IP and we go from there, but what does it mean for me, day to day?

Do I give the keys and computer logins to the IP and go on my merry way, or, how does it work?

If I have to stay in the business, what will I be doing and how long does it take to totally be free of it?

Sorry for the depressing tone, it has given me 30 years and mostly they were good, but time to go.

Thanks

In general, a director cannot in effect hand just over the keys and leave it at that because a Liquidator enters office as a stranger. Unlike the director, the Insolvency Practitioner does not have the director's wealth of knowledge of the company at their fingertips. It cannot be assumed the Insolvency Practitioner will hoover this knowledge without some considerable assistance from the director(s).

In cases of a well organised company with an informative set of records in good order, the extent of the engagement between the Insolvency Practitioner and the director might not need to be so extensive but even in cases of a solvent members voluntary liquidation (as opposed to an insolvent creditors voluntary liquidation) now that HMRC clearance is no longer issued any more, the Insolvency Practitioner will generally need positive and prompt assistance from a director to clarify many items of information so the procedures can be properly complied with.

Commonly this will be done by the provision of questionnaires, meetings and provision of records so that in an insolvent liquidation (for example only) the Statement of Affairs and SIP 6 Report to Creditors can be assembled in a way required by the legislation and regulators.

Some directors may envisage a liquidation might happen by paying a fee to an Insolvency Practitioner and out sprouts the liquidation. I am afraid it is often not quite so simple, even for a small company as there can be many features one needs to consider.

Liquidation is a formal legal procedure provided for under the Insolvency Act 1986 whereby the Liquidator once formally appointed acts instead of the Directors. The gateway to it is provided by the Company's own Articles of Association. Those Articles can influence what is required in order to get the ball rolling.

Getting the company into liquidation can take a reasonably short period of time but will require the director's assistance. Once into liquidation, the director's involvement can be far less but it commonly requires the director to still cooperate with the liquidator when called upon to do so.

I hope that helps. If I can be of any further assistance my details are below and I am sure the IPs here will also offer assistance.

 

[C.J]

Thank you Elliot

Mine is a very small business with only a few debtors and creditors. Of course I am happy to assist the IP/Liquidator and do what is required. I just wondered what the average timescale from calling an IP to completion?

 

[Gavin Bates]

In reply to your question, the active involvement of a director in a small liquidation is about 3 weeks (although most likely will only be a couple of days work in this time frame).

Whilst most liquidations take about a year after the first 3 weeks or so it could be as simple as a phone call here and there or a few emails. A Common example may be a customer is not paying because they say X, what are your thoughts?

 

[ChrisCallaghan]

Thank you Elliot

Mine is a very small business with only a few debtors and creditors. Of course I am happy to assist the IP/Liquidator and do what is required. I just wondered what the average timescale from calling an IP to completion?

Hi @C.J ,

All very case specific. For a basic case, once we have all the required information, only a few weeks. From very first phone call to appointment of liquidator, depending on how quickly a director can provide requested info, average timescale for my cases is 4 - 6 weeks at my practice.

 

[Lisa Thomas]

It takes on average 2-3 weeks to put the company into liquidation from the date of instruction, depending on how proactive the directors are at providing the information needed.

Please note the liquidation itself then rumbles on in the background. On average this is about 6 months before the case is closed and company dissolved, but if there are more complicated factors then it can be longer.

 

[Elliot Green]

Thank you Elliot

Mine is a very small business with only a few debtors and creditors. Of course I am happy to assist the IP/Liquidator and do what is required. I just wondered what the average timescale from calling an IP to completion?

Timescale is not easy to say because a liquidation is not like a trading business. It is a formal administrative procedure. It can be very much stop and start for the liquidator.

Many directors wonder why the liquidation itself (as opposed to getting the company *into* liquidation) takes so long and that is because the liquidator will want to be comfortable before putting the company firmly to sleep at its final resting place, by ensuring there is nothing that can sprout that should have been dealt with.

So for many liquidations, they may *seem* to lie dormant for weeks and in some cases months at a time. Every now and then, something turns up (such as a letter from HMRC or someone else) and it erupts to life again for the liquidator primarily for a short period.

Once a company goes into liquidation due to Section 103 of the Insolvency Act 1986 the director(s) lose their powers. Directors are not responsible for the company's administration through the liquidation; that role is reserved to the liquidator.

Nevertheless, the Director has a duty under Section 235 of the Insolvency Act 1986 to cooperate with the liquidator at such times as the officeholder may reasonably require.

I trust this assists, wish you well and if I can be of any further assistance my details are below.

 

[Lisa Thomas]

It takes on average 2-3 weeks to put the company into liquidation from the date of instruction, depending on how proactive the directors are at providing the information needed.

Please note the liquidation itself then rumbles on in the background. On average this is about 6 months before the case is closed and company dissolved, but if there are more complicated factors then it can be longer.

* Creditors Voluntary Liquidation.

For a compulsory liquidation via the court it's usually at least 3 months, depending on court capacity.