Due to the coronavirus pandemic, a lot of companies are under a lot of financial debt. There are others who do not want to run a company anymore as it is becoming too much of a burden. But what can be done? Those of you who are unable to deal with it and want to close your company, don’t worry. Even though the process is as complicated as forming a new company, it is not an impossible task. There is certain information that you need to be aware of in order to move forward. You have to take permission from all the board members before you decide to do so. Moreover, you need to check whether your company is solvent or Insolvency Support?
Solvent companies – what to do?
When you say that your company is ‘solvent,’ it indicated that your company still has enough capability to pay back the loans. However, an ‘insolvent’ company does not have enough funds to pay back its debts. There are two ways to close a solvent company. The first method is:
1. Striking it off from the register of companies
You need to apply for this option in case you want to close your business. However, there are certain guidelines that you need to follow in order to apply. You can only strike off your limited company if you haven’t sold any stock in the past three months. Moreover, you cannot apply if you have changed your company’s name in the last three months. You also cannot apply if your company faces no liquidation threats and has no such agreements with any creditor. If your company is unable to meet these criteria, you will have to liquidate your company.
2. Liquidating your company
You can decide to move forward with the member’s voluntary liquidation. This can only be done if your company is solvent. This option can only be chosen if you want to retire or want to step down from the business, and you are unable to find anyone suitable enough to run it. In order to make the liquidation process further, you will have to file for the ‘Declaration of solvency’ and assess your company’s liabilities as well as assets.
How will you draft a ‘declaration of solvency’?
You have to take the approval of all the directors of your company before you draft it. After assessing that your company will be able to pay off its debts with interests, you can file a ‘declaration of solvency.’ Your draft should include the name of your company, assets, liabilities, address of your company, name, and address of all the directors of your company as well as the timeframe within which your company will be able to pay off all the loans. You must remember that the timeframe cannot exceed beyond 12 months from the liquidation date. This is the process that is required in Welsh and English companies.
What is the process to liquidate your Scottish company?
You do not need the draft mentioned above for Scottish Companies. You need to form a 4.25 declaration form instead. The form needs your signature as well as the signatures of other directors.
What to do after that?
After you have signed the form or drafted the declaration of solvency, you have to call a meeting with other shareholders and pass a resolution for closing the company voluntarily. The meeting should be held within 5 weeks of the draft being formed or the form that was signed. You have to find a licensed insolvency practitioner to look after the entire process. You have to advertise the resolution you took on ‘The Gazette’ and within around 14 days. The final step is to send the draft or the form to ‘Companies House or ‘Accountant of Bankruptcy.’
Insolvency – what to do in case of insolvent companies?
An insolvent company is a company that owes money to its creditors and does not have the means to pay it off. You have to make arrangements for the liquidation of your company. The process is to call a meeting with your shareholders. At least 75% of them should agree to the liquidation process and pass a resolution for winding up. You have to find then a licensed insolvency practitioner who will act as a liquidator and take charge. The resolution has to be sent to the ‘Companies House’. This should be done within 15 days of drafting the resolution. Moreover, you have to advertise the resolution within 14 days on ‘The Gazette.’
Now that you are well aware of what is to be done to close your company, start making the necessary arrangements as soon as possible. But be very careful. Think before you start acting. Once you begin this process, things will get complicated, and hence, you need to be 100% sure.