Liquidation of Ltd Company or Conversion to CIC

[Kora]

I'm currently the sole director of a small ltd company which has been trading for 8 years.

In the last couple of years, profits have dipped and we have made a small loss. We currently have small outstanding debts with some left to pay on a Bounce Back Loan, a credit card that's overdue (it's a business card but I'm personally liable for it if it goes unpaid) and HMRC. The HMRC bill is for a late filing penalty that wasn't paid. We didn't believe we should be liable as we have an accountant who is paid monthly and is the one who gets the reminders etc. We felt that they were liable. This hasn't been resolved and has now doubled as it's been passed on to a third party.

We do alot of work in the community and would like to continue to do this but need to change the business structure to make it viable, and so we are compensated for this work.

We have successfully received small grants in the past as a freelance artist in the community. We would like to expand on this work and take on bigger projects but we can't apply for Funding as a ltd company. As a CIC we can apply to Creative Scotland, National Lottery, Local council for grant funding.

We have premises and our lease is up for renewal next month and the landlord doesn't mind if it's a different company name or structure.

From speaking with different funders and organisations, it seems that showing that you have been established for a number of years is definitely more fabourable than being newly established.

Therefore, I am unsure as to whether I should liquidate the original company and set up a new CIC or whether I should try and convert the existing company to a CIC and try and make an agreement with creditors.

I know it is possible to convert to the CIC if we complete the necessary paperwork but not sure if this is the best option especially as there is outstanding debt and at the moment we don't have the money to pay them.

Any advice on this matter would be much appreciated.

 

[Lisa Thomas]

Hello

Sorry to hear about your problems.

How much are the company's total debts?

What assets are there, if any, and how much are they worth?

What is the position as regards an director loan accounts?

 

[UK Contractor Accountant]

We didn't believe we should be liable as we have an accountant who is paid monthly and is the one who gets the reminders etc. We felt that they were liable

Regardless it is the Directors Statutory responsibility to ensure accounts & returns are filed on time.

 

[Kora]

Hello

Sorry to hear about your problems.

How much are the company's total debts?

What assets are there, if any, and how much are they worth?

What is the position as regards an director loan accounts?

Thanks for your reply.

Total debts including the credit card are £9585.

Not much in way of assets or ones that can be sold on. We are in a rented property and have mirrors and flooring which were costly to install but now can't be lifted and sold on. We are in the process of selling off some other equipment which will total around £600.

Company owes director £2900.

 

[Kora]

Regardless it is the Directors Statutory responsibility to ensure accounts & returns are filed on time.

Whilst I appreciate what you are saying, they are the ones who file for us and are paid to do so. They were provided with the information to file and didn't within the necessary time frame. That's why I felt they should be responsible for paying the fine.

 

[Elliot Green]

Whilst I appreciate what you are saying, they are the ones who file for us and are paid to do so. They were provided with the information to file and didn't within the necessary time frame. That's why I felt they should be responsible for paying the fine.

What did they say was the reason for not filing?

 

[Paul Kelly ICHYB]

Whilst I appreciate what you are saying, they are the ones who file for us and are paid to do so. They were provided with the information to file and didn't within the necessary time frame. That's why I felt they should be responsible for paying the fine.

But what did they say every day when you chased them to file? Whilst they are responsible for preparing and filing the paperwork for you, you are responsible to make sure that they do it!

 

[Kora]

I appreciate the responses but the point of my post was not to receive advice on the late filing penalty, I was just pointing out that this has now contributed to our debt. We have just received notice that the amount has increased and I need to deal with it but the money is not there to do so.

Hence why I was looking for advice on liquidation or changing the company structure.

 

[Lisa Thomas]

What assets does the company have? Including any overdrawn director loan accounts?

 

[Kora]

What assets does the company have? Including any overdrawn director loan accounts?

Is this what you are looking for? If not then please just let me know. Thanks for taking the time to respond.

Thanks for your reply.

Total debts including the credit card are £9585.

Not much in way of assets or ones that can be sold on. We are in a rented property and have mirrors and flooring which were costly to install but now can't be lifted and sold on. We are in the process of selling off some other equipment which will total around £600.

Company owes director £2900.

 

[Lisa Thomas]

Is this what you are looking for? If not then please just let me know. Thanks for taking the time to respond.

Thank you. Sorry I missed the original reply. It seems as if the company is insolvent. It has c£13k of debt and only £600 of assets.

To my mind, the options are:

1. Liquidate the company, either via c compulsory liquidation in the court, or a voluntary liquidation out of court. Usually the relevant costs would be paid from the company assets, but here it seems there are insufficient assets available to cover those costs so you would need to pay from your own pocket if you wanted to go down one of these routes. You are not obligated to pay personally.

2. find c£12k to plus the deficiency.

3. Look to dissolve the company.

4. If you decide to convert to a CIC (Take advice from an accountant on whether this is possibly/viable) you will need to ensure you can trade out of the insolvency and turn things around so that they don't get worse. Ensure you have clearly identified what has caused it's insolvency, that those problems can be fixed, and the business turn into profitability.