Liquidation of my pub, I have a few questions - could someone please help?

ansuper

Free Member
Feb 21, 2019
21
5
Good Morning,

I'll cut straight to the chase. Like many other businesses in hospitality (I'm the company director of a pub which is in a LTD company) I have been affected by COVID-19 to the point where now things are getting scarily close to an end. The company has a £100,000 CBIL debt and a £50,000 bounce back loan debt, for which payments started back in April, and business has not picked up. I want to liquidate the company as I just cannot pay this debt (I've exhausted everything including getting an extension on the loan), but I have a few questions that I was hoping people here can help.

1.) If I liquidate the company, what actually happens? Do I get interviewed?
2.) Will I get a ban for being a company director, even if the pandemic was the reason and so many other companies are going to fold?
3.) If I do get a penalty as shown above, what do liquidators even look at to determine a penalty? What's likely? Could I get a personal fine?
4.) The CBIL loan has no personal guarantee, so I myself have no debts, but the company does. Is this correct?


5.) Another issue is what happens next for the pub. Is there any any way at all where I could liquidate the company but still be involved in the pub? I.e. if someone else takes over and I become a general manager? Or do I have to walk away completely.

6.) The other issue is I've been reading online and every-time I see what liquidators look at, they look for fraudulent activity. It's scaring me because the only things I've done is do some refurbishment on the pub (back in June 2020), topped up wages and paid suppliers in cash. I've also used some of the money for local marketing - none of this is fraud right? In hindsight refurbishing the pub was not a good decision, but I never expected the pandemic to last this long.

I'm now 50 and this pub was handed to me through three generations. It's been my life and I just don't want to leave it but I feel like I have no choice. I just know I need to walk away from this stupid high levels of debt that I just cannot repay.

If anyone can help and provide advice with above, it is much appreciated. I would like advice before I go to an insolvency agency or a liquidator - because I want to make sure the liquidator or whoever I go to is not giving me false promises and to see all viewpoints.

Many Thanks.

Notes due to questions asked:

1.) The pub building is owned by a landlord, and I own the lease in my personal name (most likely I will have to hand the lease back if I walk away right?)

2.) I own and am the sole company director of the LTD company which the pub trades under.

3.) I am looking to start liquidation proceedings soon and have not done so yet. (Probably next week).
 
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MikeJ

Free Member
Jan 15, 2008
6,161
1,829
Edinburgh
First question that's always asked...

Is this a limited company? I know you've mentioned "company" and "director", but it's best to be clear.
 
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KAC

Free Member
May 7, 2017
1,543
368
Most insolvency practitioners offer a free initial meeting to review the financial position and advise you of options open to you. You should really speak to one @Gavin Bates or @Lisa Thomas may be able to help although there are also other IPs who post on here
 
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UKSBD

Moderator
  • Business Listing
    If the pub has been in the family 3 generations who actually owns the pub and the land, the Limited Company or yourself/family personally?

    Edit: or brewery/3rd party
     
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    ansuper

    Free Member
    Feb 21, 2019
    21
    5
    Most insolvency practitioners offer a free initial meeting to review the financial position and advise you of options open to you. You should really speak to one @Gavin Bates or @Lisa Thomas may be able to help although there are also other IPs who post on here
    Hi,

    Yes I understand but I just want to get advice and answers on this forum first i.e. people with personal experiences of liquidation or people that can help!

    Many Thanks,
     
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    Chris Parkman

    Legacy Full Member
    Apr 4, 2021
    65
    19
    www.purnells.co.uk
    To Ansuper

    I think that having some advice from an Insolvency Practitioner would be useful for you, so that it can be discussed in detail. However to answer your questions broadly:

    1. With regards to an interview, it depends on whether you go down the compulsory liquidation route or the creditors voluntary liquidation route. In a compulsory liquidation there will a formal interview with the case work at the Official Receiver's office. In the voluntary route there is not usually a formal interview.

    2. In relation to being disqualified as a director, this would only happen if you breached your fiduciary duties as a director.

    3. Liquidators have a statutory duty to look at the conduct of the directors. There is no penalty as such. However, if say you took a significant sum of money out of the Company inappropriately, you may have to repay that personally.

    4. If the liability is in the name of the Company, and you have not given a personal guarantee, you are not responsible for that debt., except in certain circumstances, for example if the debt was incurred fraudulently.

    5. This depends on the set up with the landlord. For example if it was a Punch Pub, sometimes they will ask the previous director to manage the pub in the short term, as they would prefer to keep the pub open, so that they can still sell beer etc.

    6. No insolvency practitioner will be able to conduct an investigation prior to liquidation. The key issue will be what your intentions and reasoning were at the time. Making a bad decision with hindsight is not the same as being fraudulent.

    You said that you own the lease personally, is that correct, as that would be a material issue?

    I think that you need to have a meeting with an Insolvency Practitioner, most, including myself, will offer a free first meeting and provide advice in writing. You can then have proper and detailed advice and then make an informed decision as to what action you wish to take.
     
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    Hi

    Chris has already provided an excellent reply to your questions but the best thing to do is to book an appointment with an IP to explain this all in greater depth. Most IP's will offer a free initial meeting free of charge.

    You will then have a better idea of the process and how it affects you.

    I hope this helps.

    Kind regards

    Gavin
     
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    For the most part, as above, it appears that you are personally free of liability - however the terms of your lease will be a significant factor

    To pre-empt, your landlord will probably need to agree to any assignment of the lease, but if they agree there is absolutely nothing to stop you from running the pub as a sole trader or potentially as a new limited company.
     
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    Are you not personally liable for the lease rentals to the end of the term as the lease is in your name?

    Lease break clause will need looking at as well sub leasing.

    I assume the company was solvent when you applied for BBL & CBIL? That's another area that will be looked at by an IP as well what the funds where used for.
     
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    How were you able to get both a CBIL and BBL? You were only supposed to be able to apply to one or the other.
    i think you could apply for BBL if you had a CBILS in place but only to pay off the CBIL and vice versa?
     
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    WaveJumper

    Free Member
  • Aug 26, 2013
    2,393
    602
    Essex
    When I looked into this, I found you cannot apply for a BBL loan if you already have Coronavirus Business Interruption Loan (CBIL) scheme loan.

    And if you have an existing Coronavirus Business Interruption Loan or Overdraft (CBIL) for under £50,000, you were able switch that facility to a BBL

    One of the rules for applying:
    “Able to declare that the business was not insolvent or otherwise a business in difficulty on 31 December 2019. Businesses unable to make this declaration will be asked to complete a form to assess their eligibility under State Aid rules.”
     
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    WaveJumper

    Free Member
  • Aug 26, 2013
    2,393
    602
    Essex
    How were you able to get both a CBIL and BBL? You were only supposed to be able to apply to one or the other.
    You could well be correct - from the good old internet:

    "However, businesses are not permitted to have a loan under the BBLS and CBILS at the same time. If a CBILS loan is received at a later date, part of the funds received must be used to repay any outstanding BBLS loan".
     
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    Lisa Thomas

    Business Member
    Apr 20, 2015
    3,896
    553
    Good Morning,

    I'll cut straight to the chase. Like many other businesses in hospitality (I'm the company director of a pub which is in a LTD company) I have been affected by COVID-19 to the point where now things are getting scarily close to an end. The company has a £100,000 CBIL debt and a £50,000 bounce back loan debt, for which payments started back in April, and business has not picked up. I want to liquidate the company as I just cannot pay this debt (I've exhausted everything including getting an extension on the loan), but I have a few questions that I was hoping people here can help.

    1.) If I liquidate the company, what actually happens? Do I get interviewed?

    If you liquidate through the court (Compulsory Liquidation) , then yes. if you liquidate voluntarily (Creditors Voluntary Liquidation, "CVL") then no, unless it becomes necessary as part of the investigation.

    2.) Will I get a ban for being a company director, even if the pandemic was the reason and so many other companies are going to fold?

    Not unless you have committed misfeasance - even then it is very low risk.

    3.) If I do get a penalty as shown above, what do liquidators even look at to determine a penalty? What's likely? Could I get a personal fine?

    The Liquidators report your conduct to the Insolvency Service.

    They have the power to disqualify fine (Or imprison if criminal misconduct has occurred). The level of fine depends on what misconduct has occurred.

    The Liquidators can pursue you for repayment if there is a claim against you.


    4.) The CBIL loan has no personal guarantee, so I myself have no debts, but the company does. Is this correct?

    Correct unless you have given personal guarantees.

    5.) Another issue is what happens next for the pub. Is there any any way at all where I could liquidate the company but still be involved in the pub? I.e. if someone else takes over and I become a general manager? Or do I have to walk away completely.

    You could start again under a Phoenix umbrella. You could explore alternatives to Liquidation like a CVA.

    If someone else takes over that will be up to them if they want to hire you.


    6.) The other issue is I've been reading online and every-time I see what liquidators look at, they look for fraudulent activity. It's scaring me because the only things I've done is do some refurbishment on the pub (back in June 2020), topped up wages and paid suppliers in cash. I've also used some of the money for local marketing - none of this is fraud right? In hindsight refurbishing the pub was not a good decision, but I never expected the pandemic to last this long.

    None of what you have stated suggests fraud has occurred. They look at whether there was fraud with the application and fraud with what you spent the money on. Many directors have committed fraud with the BBLs because they took the money for themselves.

    I'm now 50 and this pub was handed to me through three generations. It's been my life and I just don't want to leave it but I feel like I have no choice. I just know I need to walk away from this stupid high levels of debt that I just cannot repay.

    If anyone can help and provide advice with above, it is much appreciated. I would like advice before I go to an insolvency agency or a liquidator - because I want to make sure the liquidator or whoever I go to is not giving me false promises and to see all viewpoints.

    Many Thanks.

    Notes due to questions asked:

    1.) The pub building is owned by a landlord, and I own the lease in my personal name (most likely I will have to hand the lease back if I walk away right?)

    Unfortunately you will be on the hook personally for rent arrears, future rent and dilapidations charges and interest. Is there a break clause?

    2.) I own and am the sole company director of the LTD company which the pub trades under.

    3.) I am looking to start liquidation proceedings soon and have not done so yet. (Probably next week).
     
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    WaveJumper

    Free Member
  • Aug 26, 2013
    2,393
    602
    Essex

    Having completed a “video fest” of Lisa’s online advice (via YouTube) I would recommend go take a look, the advice is clear and straight forward …… well done Lisa
     
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    Lisa Thomas

    Business Member
    Apr 20, 2015
    3,896
    553
    Having completed a “video fest” of Lisa’s online advice (via YouTube) I would recommend go take a look, the advice is clear and straight forward …… well done Lisa

    Thank you WaveJumper, if nothing else I hoped they helped you to sleep!
     
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    ansuper

    Free Member
    Feb 21, 2019
    21
    5
    How were you able to get both a CBIL and BBL? You were only supposed to be able to apply to one or the other.
    Hi,

    Yes I applied for Bounce Back first and got that as the CBIL was taking very long to get cleared. Then my CBIL got approved (two months later) however I thought I could pay the Bounce Back Loan with the pub's cashflow. Albeit this isn't the case.
     
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    ansuper

    Free Member
    Feb 21, 2019
    21
    5
    To Ansuper

    I think that having some advice from an Insolvency Practitioner would be useful for you, so that it can be discussed in detail. However to answer your questions broadly:

    1. With regards to an interview, it depends on whether you go down the compulsory liquidation route or the creditors voluntary liquidation route. In a compulsory liquidation there will a formal interview with the case work at the Official Receiver's office. In the voluntary route there is not usually a formal interview.

    2. In relation to being disqualified as a director, this would only happen if you breached your fiduciary duties as a director.

    3. Liquidators have a statutory duty to look at the conduct of the directors. There is no penalty as such. However, if say you took a significant sum of money out of the Company inappropriately, you may have to repay that personally.

    4. If the liability is in the name of the Company, and you have not given a personal guarantee, you are not responsible for that debt., except in certain circumstances, for example if the debt was incurred fraudulently.

    5. This depends on the set up with the landlord. For example if it was a Punch Pub, sometimes they will ask the previous director to manage the pub in the short term, as they would prefer to keep the pub open, so that they can still sell beer etc.

    6. No insolvency practitioner will be able to conduct an investigation prior to liquidation. The key issue will be what your intentions and reasoning were at the time. Making a bad decision with hindsight is not the same as being fraudulent.

    You said that you own the lease personally, is that correct, as that would be a material issue?

    I think that you need to have a meeting with an Insolvency Practitioner, most, including myself, will offer a free first meeting and provide advice in writing. You can then have proper and detailed advice and then make an informed decision as to what action you wish to take.


    Hi,

    Thank you for your great response!

    1.) So in this case would the liquidation be compulsory or creditors voluntary? Is it up to me? Which would be better?

    2.) For breaching my duties, what would be examples of these? Would taking the BBL and CBIL out together be a breach? At the time I had little choice. I also have a 40k VAT bill that I am struggling to pay.

    3.) Okay. I've taken no money out, (there are no director loans). Only cash bills have been paid for renovations and paying suppliers to keep them up to date.

    4.) Would I have incurred the debt fradulently? Could you explain further for this?

    5.) What would the investigation curtail? I.e. what paperwork do they use to investigate?

    Yes, but the lease was acquired for £1.

    I see. Okay maybe that my be an option but I am still trying to gauge as much as I can before going ahead with this. I believe you have also messaged me so I will reach out to you soon.

    Please advise,

    Many thanks for your help!
     
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