Insolvency isn’t something we normally like to think about but it is important for all company directors to have an understanding of the term and exactly what constitutes ‘insolvent’.
It’s difficult to know where to turn if your business is approaching insolvency, and it’s easy to ignore the signs and potentially land yourself in a spot of trouble. As professional insolvency practitioners, we get asked about company insolvency and liquidation processes frequently so we’ve put together a short list of the most common questions.
I’m sure my company is insolvent – what do I do?
It’s fairly easy in hindsight to spot when you first got into trouble but if you’ve looked over your reports and financial records and fear that your company may be insolvent (that is, your debts outweigh your ability to repay them), you need to speak to a licensed insolvency practitioner immediately and before you do anything else.
A practitioner will be able to guide the process for you and take away a lot of the stresses and strains of the decision making process and more importantly they will be able to stop you making mistakes that may cost you money.
What will happen to my employees?
This is a common concern of directors whose businesses are approaching liquidation. If you leave it too long and the company gets into dire financial circumstances, it can be impossible to pay your employees. If this is the case they can submit a claim for unpaid wages, holiday or sick pay, redundancy etc to the Redundancy Payments Office which is Government led scheme. You can help on their behalf and the administrator/liquidator in charge might also lend assistance.
That having been said there are options available to help potentially viable businesses trade out of their difficulties and your insolvency practitioner will be able to advise whether these are suitable for your situation.
After insolvency/liquidation, can I be the director of another limited company in the future?
When your business goes through insolvency or liquidation procedures there will be an investigation into the company’s financial affairs and conduct of the directors. The answer to the above question very much depends on the outcome of this investigation. Appointed liquidators or administrators will carry out the investigation and report to the Department for Business, Innovation and Skills (otherwise known as BIS). If they’re sure you acted well and in good faith, with the interests of your creditors at heart, you have nothing to worry about.
Can I re-use my company name after liquidating the company?
There are incredibly strict rules in place preventing the use of the same company name in 12 months leading up to liquidation, mainly to avoid confusing with creditors chasing up debts. But there are one or two exceptions you’ll discover if you seek some professional advice. So long as all creditors are notified through the proper channels, it is possible to buy back all of the liquidated assets (as well as the brand) from the liquidator. Court permission to re-use the company name can also be applied for but this has very tight rules and time frames. Re-using your company name could help you keep the brand ‘alive’ and carry on trading as normal in the public eye.
How long does it take to liquidate a company?
Usually, and this is only a guideline, it takes around a month to begin the process and declare liquidation. Once liquidation is declared the company ceases to trade immediately, and a licensed insolvency practitioner will then take the reins and guide the process to its conclusion. You will have little to worry about at this stage.
The whole process from start to the eventual striking off of the company at Companies House can take around 6-8 months for a very straightforward business.