Winding up a small business with no cost to a director

Winding up a small business with no cost to a director

Here in the UK there are many small business owners who have decided that they simply cannot trade on. I have spoken to many every week who have injected their own capital into the business in the last six months, only to find out that they have used it all up with no tangible rewards.

I feel so sorry for these directors. I often write that a Director must separate the business shell which is the limited company liability from the business. In short it is what you do and make and sell which is more important than the name of the company which you operate by. Many Directors find it hard to divorce themselves from XYZ Ltd. However, it simply does not make sense to create a limited company shell which offers personal protection only then to go and sink all your last pennies into a failing venture. If the debt ridden company was allowed to be wound up, any new capital could be invested to kick start a new company.

Any insolvency practitioner will be able to advise how best to close the insolvent company. All he will require for a director simply to be able to walk away will be some saleable assets or some cash at bank. Most IP's will agree to call a meeting of creditors, which will enable the company to be formally wound up if they are paid their fees for producing the statement of affairs, a figure in the region of 5,000.

After the company is wound up, work will need to be done by the insolvency practitioner to close the company according to statute. If there are no funds available to carry out this task and pay his fees, the IP will continue with his duties and write off his time and disbursements.

It can be seen therefore that if you need to close your company, you can do this without having to pay for it personally by leaving some assets in the business as you cease to trade. The easiest way to do this is by having cash at bank. Many liquidators will appreciate the Directors collecting in any outstanding invoices, as these tend to be disputed after the company fails. I have known 100,000's of invoices become uncollectable after a liquidation which could have been collected if the process had been properly managed.

Easily realiseable assets such as vehicles are also a good source of fees for a liquidator, as long as they are clear of finance.

If you are considering closing your business, you should speak to an IP to help him help you manage the close down.

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