Category: Client Studies

Illegal Dividends on entering liquidation – what does this mean to the shareholders?

The Board and Shareholders should take advice on the level of dividends paid to the shareholders as there is a risk that some of the dividends may be classed as Illegal Dividends.

What is an Illegal Dividend?

Dividends can only be paid from distributable reserves, that is the accumulated profits of the Company.  If and when all the distributable reserves have been paid to shareholders as dividends then any subsequent dividends paid to shareholders are classed as Illegal Dividends.  In cases where there are Illegal Dividends and the Company enters into Liquidation or Administration, the appointed Liquidator or Administrator will request that the shareholders repay any Illegal Dividends.  Some Accountants do not allow their clients to declare and pay Illegal Dividends and show the payment through the Director Loan Account causing the Loan Account to become overdrawn.  Again, the Liquidator or Administrator will also ask the Director/Shareholder to repay any overdrawn Loan Accounts.

The importance of taking advice from RPG Business Recovery?

At RPG Business Recovery we spend time with the Board reviewing these types of transactions prior to taking instruction to place the Company into Administration or Liquidation.  In some cases these payments can be resolved without causing any surprises once we have become Liquidator or Administrator.

At RPG Business Recovery, we have been contacted over recent months by Directors/Shareholders who have recently received demands from Liquidators for repayment of Loan Accounts and Illegal Dividends and we are always surprised that these issues were not raised and dealt with prior to their Insolvency Practitioner being appointed.

If you have any concerns regarding Illegal Dividends or overdrawn Director Loan Accounts then please contact us for a no obligation, confidential and free of charge meeting to discuss the options available to you.

Remember – only Licensed Insolvency Practitioners can assist you with formal insolvency appointments (this is a legal requirement) and are best placed to provide insolvency/debt advice.  Licensed Insolvency Practitioners are highly regulated and have professional indemnity insurance.  Unfortunately, there are a number of unregulated “debt advisors” advertising on the web that demand payment for their costs and then have to refer you to a Licensed Insolvency Practitioner for any formal insolvency who may also require payment and you could effectively end up paying twice unnecessarily.  In our experience, many debt advisors provide poor or wrong advice and in some cases encourage Directors to break the law.

At RPG Business Recovery we are Licensed Insolvency Practitioners and also specialists in providing businesses with turnaround solutions including avoiding liquidation.  Please feel free to contact us for a FREE no obligation meeting on 0161 608 0000 to discuss the options available to your company.  You are also welcome to contact either Alan (Mobile 07580 885750 or email acoleman@rpg.co.uk) or James (Mobile 07717 001087 or email jfish@rpg.co.uk) directly.

RPG Business Recovery is part of Royce Peeling Green Limited a firm of Chartered Accountants established over 100 years ago with offices in Manchester, London and North Wales. All Insolvency Practitioners at RPG Business Recovery are authorised and licensed by The Institute of Chartered Accountants in England and Wales.

Director liability in Liquidation including impact of Director Loan Accounts

Director liability in Liquidation can extend to a Director Loan Account.  Once the Company has been placed into Liquidation the Liquidator will make demand for repayment of the loan account which could result in the Director being declared bankrupt and/or losing their home.

A Director who loans money to or from a Company creates a Director Loan Account.  A Director Loan Account can either have a debit balance (director owes the Company) or credit balance (Company owes the director).

Some Directors are unaware that they have created a debit Directors Loan Account as they don’t believe that they have borrowed any money from the Company.  This is because the Director has been drawing monthly dividends as a shareholder.  However, once all the distributable reserves have been fully utilitied in payment of dividends then all future drawings are applied to their Directors Loan Account creating a debt due to the Company until such time as the Company makes additional profits that dividends can be drawn against.

Director liability in Liquidation

The problem arises when a Director has created a debit balance on their Director Loan Account and considering the option of Liquidation which can cause a Director liability in Liquidation. Once a Licensed Insolvency Practitioner is appointed as Liquidator they are obliged to collect all debts due to the Company even any money due on the Directors Loan Account.  Clearly, some Directors consider this to be unfair as this was effectively their salary.

At RPG Business Recovery we work closely with Directors considering the option of Liquidation to ensure that the figures are correct and working through a strategy on how to resolve the Directors Loan Account, if one exists, so there are no surprises for the Director once we are appointed as Liquidator.

At RPG Business Recovery we have recently provided advice to Directors who have placed their Company into Liquidation with other firms of Insolvency Practitioners unaware that they had a debit balance on their Directors Loan Account to then receive a letter from the Liquidator asking for repayment of many tens of thousands of pounds.

Pre Liquidation advice

We believe at RPG Business Recovery that the option of Liquidation should not be taken lightly and more importantly if and when that decision is made by the Directors that the Directors fully understand the procedure of Liquidation and the potential claims against the Directors.

Prior to engaging a firm of Insolvency Practitioners, a Director should consider:

  1. Have you been advised on all the options which include non insolvency options as well as all the insolvency options?
  2. Can you avoid insolvency but staying within the legal framework and is insolvency necessary?
  3. Who provided this advice to you?  Were they a Licensed Insolvency Practitioner or was it a non qualified member of staff?  If you are trusting your business with a firm of Licensed Insolvency Practitioners they should provide you with the respect that the Licensed Insolvency Practitioner, not one of their staff, gives you his/her time and provides the advice
  4. Has the Licensed Insolvency Practitioner provided the advice in writing?  You may need to rely on this advice at a later point in time.
  5. Be aware of the non regulated companies providing advice to Directors in financial distress, they can’t be appointed as Liquidators or Administrators as they are not Licensed Insolvency Practitioners and their advice may be questionable and/or outside the scope of the legal framework.  Also, they have been known to charge an initial fee which you may believe includes the cost of Liquidation to subsequently find out that there are additional costs for the Liquidation.  So what may have seemed a cheap option can soon become very expensive.

At RPG Business Recovery all our Licensed Insolvency Practitioners provide the initial advice and they are authorised by The Institute of Chartered Accountants in England & Wales (also known as ICAEW).  RPG Business Recovery is part of Royce Peeling Green Limited which was established in 1911 (over 105 years old) and is a firm of Chartered Accountants.

If you wish to have a free no obligation meeting with a RPG Business Recovery Licensed Insolvency Practitioner please do not hesitate to contact us.

Remember – only Licensed Insolvency Practitioners can assist you with formal insolvency appointments (this is a legal requirement) and are best placed to provide insolvency/debt advice.  Licensed Insolvency Practitioners are highly regulated and have professional indemnity insurance.  Unfortunately, there are a number of unregulated “debt advisors” advertising on the web that demand payment for their costs and then have to refer you to a Licensed Insolvency Practitioner for any formal insolvency who may also require payment and you could effectively end up paying twice unnecessarily.  In our experience, many debt advisors provide poor or wrong advice and in some cases encourage Directors to break the law.

At RPG Business Recovery we are Licensed Insolvency Practitioners and also specialists in providing businesses with turnaround solutions including avoiding liquidation.  Please feel free to contact us for a FREE no obligation meeting on 0161 608 0000 to discuss the options available to your company.  You are also welcome to contact either Alan (Mobile 07580 885750 or email acoleman@rpg.co.uk) or James (Mobile 07717 001087 or email jfish@rpg.co.uk) directly.

RPG Business Recovery is part of Royce Peeling Green Limited a firm of Chartered Accountants established over 100 years ago with offices in Manchester, London and North Wales. All Insolvency Practitioners at RPG Business Recovery are authorised and licensed by The Institute of Chartered Accountants in England and Wales.

RPG Business Recovery provides good sound advice when it is needed the most.

Director liability in Liquidation - RPG Business Recovery

What is a Creditors Voluntary Liquidation also known as CVL

There are two types of Insolvent Liquidations and there are Creditors Voluntary Liquidation and Compulsory Liquidation.

A Creditors Voluntary Liquidation is initially started by the Board of Directors concluding after taking advice from a Licensed Insolvency Practitioner that the Company is Insolvent. The Board holds a meeting convening meetings of Members (Shareholders) and Creditors for 14 days time.  These notices are advertised in The London Gazette and also sent to all creditors and shareholders by post inviting them to the convened meetings.

The Licensed Insolvency Practitioner becomes the advisor during these next two weeks and works with the Board on the production of “The Report to Creditors” which contains:

  • Statutory information held at Companies House – details of the directors, company name and number, shareholders, registered office etc
  • Financial Information – summary of the trading Profit & Loss and Balance Sheet for the past three years
  • Statement of Affairs – showing the assets and liabilities of the Company
  • List of Creditors – containing the names, addresses and amounts owed
Creditors Voluntary Liquidation

Creditors Voluntary Liquidation

Shareholders Meeting

One of the Directors need to chair the meeting but generally the Licensed Insolvency Practitioner chairs this meeting

The Shareholders need to pass the following resolutions:

  1. Special Resolution requiring 75% or more to agree to place the Company into Liquidation  (it is the shareholders that place the Company into Liquidation) and at this point the Company is in Creditors Voluntary Liquidation
  2. Ordinary Resolution requiring a simple majority appointing the Liquidator of the Company

Creditors Meeting

One of the Directors need to chair the meeting but generally the Licensed Insolvency Practitioner chair this meeting and in our experience 19 out of 20 meetings no creditors actually attend.  So no need for any sleepless nights!

  • The creditors are provided with a copy of The Report to Creditors which is discussed.
  • Creditors are invited to ask questions
  • Creditors either confirm the appointment of the Liquidator or nominate an alternative (this is rare)
  • Creditors approve the Liquidators costs
  • Creditors can form a Committee and again this is rare

The Liquidator now starts his work as Liquidator which in summary includes:

  1. Realising all the assets (collecting debts and selling assets) effectively turning all the assets into cash
  2. Assisting employees claiming monies owed to them from The Insolvency Service for Redundancy, Notice, Wages and Holiday pay
  3. Paying the costs of realisation and costs of liquidation
  4. Completing work on Directors Conduct
  5. Agreeing Creditors Claims and distributing available funds to creditors in a certain order of priority

At RPG Business Recovery all our Licensed Insolvency Practitioners provide the initial advice and they are authorised by The Institute of Chartered Accountants in England & Wales (also known as ICAEW).  RPG Business Recovery is part of Royce Peeling Green Limited which was established in 1911 (over 105 years old) and is a firm of Chartered Accountants.

If you wish to have a free no obligation meeting with a RPG Business Recovery Licensed Insolvency Practitioner please do not hesitate to contact us.

Remember – only Licensed Insolvency Practitioners can assist you with formal insolvency appointments (this is a legal requirement) and are best placed to provide insolvency/debt advice.  Licensed Insolvency Practitioners are highly regulated and have professional indemnity insurance.  Unfortunately, there are a number of unregulated “debt advisors” advertising on the web that demand payment for their costs and then have to refer you to a Licensed Insolvency Practitioner for any formal insolvency who may also require payment and you could effectively end up paying twice unnecessarily.  In our experience, many debt advisors provide poor or wrong advice and in some cases encourage Directors to break the law.

At RPG Business Recovery we are Licensed Insolvency Practitioners and also specialists in providing businesses with turnaround solutions including avoiding liquidation.  Please feel free to contact us for a FREE no obligation meeting on 0161 608 0000 to discuss the options available to your company.  You are also welcome to contact either Alan (Mobile 07580 885750 or email acoleman@rpg.co.uk) or James (Mobile 07717 001087 or email jfish@rpg.co.uk) directly.

RPG Business Recovery is part of Royce Peeling Green Limited a firm of Chartered Accountants established over 100 years ago with offices in Manchester, London and North Wales. All Insolvency Practitioners at RPG Business Recovery are authorised and licensed by The Institute of Chartered Accountants in England and Wales.

RPG Business Recovery provides good sound advice when it is needed the most.

Cheap Liquidation – the pitfalls

Should searching for a cheap liquidation on the internet be the same way you might search online to obtain the best price for an electrical appliance?  At RPG Business Recovery we believe a Director should take placing their Company into Liquidation very seriously given it may have serious ramifications for them personally if not planned correctly.

What should a Director look to obtain at the first initial meeting with a Licensed Insolvency Practitioner rather than being focused on a cheap liquidation.

  1. The advice should be conducted by a Licensed Insolvency Practitioner, be aware of non qualified and non authorised debt advisors (cheaper fees can mean using less qualified and experienced staff)
  2. The advice meeting should be conducted face to face given how important this decision will be and should not be rushed
  3. Has the Licensed Insolvency Practitioner explained fully all the non insolvency options as well as the insolvency options?
  4. Have you and the Licensed Insolvency Practitioner explored all the options of rescuing the business?
  5. Have you understood the personal liability of the directors?  This can be overlooked by a salesman wanting the Director to sign on the dotted line
  6. There are risks for Directors of insolvent companies that they may be disqualified in acting as a director for between 2-15 years if The Insolvency Service find them unfit
  7. Has the Licensed Insolvency Practitioner reviewed the Director Loan Accounts / dividend position of shareholders and drawings, the Liquidator may ask for repayment of some of these monies once appointed
  8. Although at RPG we appreciate that costs can be sensitive, in many insolvency solutions we recommend the costs are paid from the assets of the Company with no need for the Director to pay the costs personally and we are happy to provide a fixed fee quote following an advice meeting

At the point that the Company becomes insolvent, either balance sheet insolvent (liabilities greater than assets) and/or cash flow insolvent (can’t pay their liabilities as and when they fall due), the Directors need to take urgent insolvency advice from a Licensed Insolvency Practitioner.  At RPG Business Recovery we respect the time and money you have spent developing your business and we pride ourselves on rescuing more businesses than recommending an insolvency option.  For a free, confidential, no obligation meeting with a RPG Business Recovery Licensed Insolvency Practitioner please feel free to contact us.

Taking advice early normally means that more options are available to you than just simply a cheap liquidation!  At RPG all the Licensed Insolvency Practitioners are regulated and authorised by The Institute of Chartered Accountants in England and Wales (ICAEW).  Remember if something sounds too good to be true – it probably is.

Remember – only Licensed Insolvency Practitioners can assist you with formal insolvency appointments (this is a legal requirement) and are best placed to provide insolvency/debt advice.  Licensed Insolvency Practitioners are highly regulated and have professional indemnity insurance.  Unfortunately, there are a number of unregulated “debt advisors” advertising on the web that demand payment for their costs and then have to refer you to a Licensed Insolvency Practitioner for any formal insolvency who may also require payment and you could effectively end up paying twice unnecessarily.  In our experience, many debt advisors provide poor or wrong advice and in some cases encourage Directors to break the law.

At RPG Business Recovery we are Licensed Insolvency Practitioners and also specialists in providing businesses with turnaround solutions including avoiding liquidation.  Please feel free to contact us for a FREE no obligation meeting on 0161 608 0000 to discuss the options available to your company.  You are also welcome to contact either Alan (Mobile 07580 885750 or email acoleman@rpg.co.uk) or James (Mobile 07717 001087 or email jfish@rpg.co.uk) directly.

RPG Business Recovery is part of Royce Peeling Green Limited a firm of Chartered Accountants established over 100 years ago with offices in Manchester, London and North Wales. All Insolvency Practitioners at RPG Business Recovery are authorised and licensed by The Institute of Chartered Accountants in England and Wales.

Can’t pay HMRC debt? Help with outstanding tax debt

Unable to pay HMRC debt (HM Revenue & Customs) for PAYE/NIC, VAT or Corporation Tax (CT)?

Is HMRC chasing you for unpaid taxes?

Is HMRC threatening to send bailiffs?

Is HMRC threatening to issue a Winding Up Petition / place your Company into Liquidation?

The first thing is not to panic and take immediate advice on your options.  Taking advice early greatly improves your options, even if you think that you have no options left.  We have managed to keep the business doors open even after HMRC have issued a Winding Up Petition.  Do something positive TODAY and contact us for an urgent meeting to discuss all the options available to you.  Our advice meetings are free, confidential and obligation free.

Directors frequently say that once that they have had a meeting with us that they have been worrying unnecessarily including many sleepless nights and now they are armed with all the options needed to move forward positively.

What do we do?

Firstly we assess your business and establish whether you have a viable business going forward and whether your business would benefit from some restructuring.  This may make your business more robust going forward and not only may it assist with turning the business from loss making to profit making, it may also allow you to start drawing a living wage.

Secondly, once we have established that you have a viable business going forward we explore all the options available to you in which to deal with the debt due to HMRC.  We have helped many businesses explore the following options:

  • A time to pay agreement dealing with the HMRC debt over a period of time that is genuinely affordable to the business, rather than HMRC demanding the monies be paid in a relatively short period of time
  • Obtaining finance or refinance, even when you have been declined by your bankers.  We have access to many corporate lenders that specialise in releasing tied up working capital
  • Investors / Venture Capitalists, we have access to many investors that invest in viable businesses and this helps release much needed working capital
  • Insolvency options – including Company Voluntary Arrangements, Administration and Liquidation – these options should only be considered as a last resort and should not be taken lightly

Personal Liability

If you are a director of a limited company, you may believe that you are not personally liable for the debts of the Company.  However, if you continue trading using HMRC monies (trading to the detriment of the Crown / also known as Wrongful Trading) then the Directors may become personally liable for the debts to their creditors which have been accrued past the point that the Directors either knew that they were insolvent or ought to have known that they were insolvent.  The test of insolvency is relatively simple being:

  • Cash Flow Insolvent – can you pay your debts as and when they fall due (including HMRC debt) and/or
  • Balance Sheet Insolvent – are your liabilities greater than your assets causing a negative asset position

Furthermore, trading past the point of Insolvency and/or trading to the detriment of the Crown may also result in the Directors being disqualified from being a Director for a period up to 15 years.  We have experienced recently that Directors being disqualified for a relatively short period of time has caused them problems in obtaining credit for future Companies that they may wish to run and therefore affect the Director’s ability to potentially earn a living in the future.

If you are in a position that you are unable to pay the HMRC debt for any outstanding debts then we recommend that you take advice early.  The earlier that you take advice then more options are likely to be available to you.  Please feel free to contact us for a free and no obligation meeting to discuss all your options.

Remember – only Licensed Insolvency Practitioners can assist you with formal insolvency appointments (this is a legal requirement) and are best placed to provide insolvency/debt advice.  Licensed Insolvency Practitioners are highly regulated and have professional indemnity insurance.  Unfortunately, there are a number of unregulated “debt advisors” advertising on the web that demand payment for their costs and then have to refer you to a Licensed Insolvency Practitioner for any formal insolvency who may also require payment and you could effectively end up paying twice unnecessarily.  In our experience, many debt advisors provide poor or wrong advice and in some cases encourage Directors to break the law.

At RPG Business Recovery we are Licensed Insolvency Practitioners and also specialists in providing businesses with turnaround solutions including avoiding liquidation.  Please feel free to contact us for a FREE no obligation meeting on 0161 608 0000 to discuss the options available to your company.  You are also welcome to contact either Alan (Mobile 07580 885750 or email acoleman@rpg.co.uk) or James (Mobile 07717 001087 or email jfish@rpg.co.uk) directly.

RPG Business Recovery is part of Royce Peeling Green Limited a firm of Chartered Accountants established over 100 years ago with offices in Manchester, London and North Wales. All Insolvency Practitioners at RPG Business Recovery are authorised and licensed by The Institute of Chartered Accountants in England and Wales.

Is my Company Insolvent or Bust?

Is my Company Insolvent or Bust should be relatively easy for you to conclude yourself.

The formal test for Insolvency is defined in Section 123 of The Insolvency Act 1986:

  1. BALANCE SHEET TEST – Are the Company’s assets sufficient to cover the Company’s liabilities and
  2. CASH FLOW TEST – Can the Company pay their debts as and when they fall due including debts due to HM Revenue & Customs

If your Company fails on the above tests then you should take immediate Insolvency advise from a Licensed Insolvency Practitioner.

As a Director you have an obligation to deal with the Company in an appropriate manner when the Company becomes financially distressed.  Taking appropriate advice from a Licensed Insolvency Practitioner will help you deal with this obligation and reduce risks on you personally.

  • The Licensed Insolvency Practitioner may conclude that it is temporary situation and that following certain guidelines you may be able to trade on, this advice reduces the risk on you personally if the Company subsequently fails in a relatively short period of time
  • The Licensed Insolvency Practitioner may provide advice/assistance on measures that need to be taken to ease cash flow pressures
  • The Licensed Insolvency Practitioner may recommend an insolvency procedure as the Company is insolvent and will discuss ALL the insolvency options available to you

So although it should be relatively easy for a Director to answer the question, is my Company Insolvent?  It requires expertise and skill from a Licensed Insolvency Practitioner to be able to steer you in the right direction while also staying within the legal framework.

At RPG Business Recovery all our Licensed Insolvency Practitioners provide the initial advice and they are authorised by The Institute of Chartered Accountants in England & Wales (also known as ICAEW).  RPG Business Recovery is part of Royce Peeling Green Limited which was established in 1911 (over 105 years old) and is a firm of Chartered Accountants.

If you wish to have a free no obligation meeting with a RPG Business Recovery Licensed Insolvency Practitioner please do not hesitate to contact us.

Remember – only Licensed Insolvency Practitioners can assist you with formal insolvency appointments (this is a legal requirement) and are best placed to provide insolvency/debt advice.  Licensed Insolvency Practitioners are highly regulated and have professional indemnity insurance.  Unfortunately, there are a number of unregulated “debt advisors” advertising on the web that demand payment for their costs and then have to refer you to a Licensed Insolvency Practitioner for any formal insolvency who may also require payment and you could effectively end up paying twice unnecessarily.  In our experience, many debt advisors provide poor or wrong advice and in some cases encourage Directors to break the law.

At RPG Business Recovery we are Licensed Insolvency Practitioners and also specialists in providing businesses with turnaround solutions including avoiding liquidation.  Please feel free to contact us for a FREE no obligation meeting on 0161 608 0000 to discuss the options available to your company.  You are also welcome to contact either Alan (Mobile 07580 885750 or email acoleman@rpg.co.uk) or James (Mobile 07717 001087 or email jfish@rpg.co.uk) directly.

RPG Business Recovery is part of Royce Peeling Green Limited a firm of Chartered Accountants established over 100 years ago with offices in Manchester, London and North Wales. All Insolvency Practitioners at RPG Business Recovery are authorised and licensed by The Institute of Chartered Accountants in England and Wales.

RPG Business Recovery provides good sound advice when it is needed the most.

 

I have received a Winding Up Petition – what can I do?

If you have received a winding up petition, then first of all don’t panic.  BUT do contact us without delay as your options are reducing day by day.

What is a winding up petition?

A winding up petition is issued normally as a last resort by your creditor(s) to collect a debt from you if you owe them more than £750.  A large proportion of winding up petitions are issued by HM Revenue & Customs for unpaid tax debts.  If you do nothing about the petition and at the hearing you are not present or represented then in all likelihood your company will be wound up meaning that the company will be placed into Compulsory Liquidation.  This will result in the business ceasing to trade (close down) and all employees being made redundant.

What is the procedure from receiving a winding up petition?

  1.  The winding up petition will be sent to you (served) at your Registered Office as recorded at Companies House.
  2. Between seven days after receiving the petition (service) and seven days before the hearing, the petition will be advertised in the London Gazette.  All banks and financial institutions read the London Gazette which is published on every working day.  On the advertisement of the winding up petition, your bank account will be frozen, factoring/discounting facility will be frozen and some of your customers/suppliers will also learn that you have received a winding up petition.  This is likely to cause the company immediate problems with on-going trading.
  3. The winding up petition will tell you which Court the winding up hearing will be held and on what date.  Please have this document ready when you contact us and ideally email it to us at acoleman@rpg.co.uk prior to contacting us so that we have all he information available to provide you some initial advice.

To prevent business closure and to understand your options – contact us for an urgent meeting in order that we can explain the procedure above in more details and also explain all the options available to you.  This initial meeting is free of charge, confidential and without any obligation.

Remember – only Licensed Insolvency Practitioners can assist you with formal insolvency appointments (this is a legal requirement) and are best placed to provide insolvency/debt advice.  Licensed Insolvency Practitioners are highly regulated and have professional indemnity insurance.  Unfortunately, there are a number of unregulated “debt advisors” advertising on the web that demand payment for their costs and then have to refer you to a Licensed Insolvency Practitioner for any formal insolvency who may also require payment and you could effectively end up paying twice unnecessarily.  In our experience, many debt advisors provide poor or wrong advice and in some cases encourage Directors to break the law.

At RPG Business Recovery we are Licensed Insolvency Practitioners and also specialists in providing businesses with turnaround solutions including avoiding liquidation.  Please feel free to contact us for a FREE no obligation meeting on 0161 608 0000 to discuss the options available to your company.  You are also welcome to contact either Alan (Mobile 07580 885750 or email acoleman@rpg.co.uk) or James (Mobile 07717 001087 or email jfish@rpg.co.uk) directly.

RPG Business Recovery is part of Royce Peeling Green Limited a firm of Chartered Accountants established over 100 years ago with offices in Manchester, London and North Wales. All Insolvency Practitioners at RPG Business Recovery are authorised and licensed by The Institute of Chartered Accountants in England and Wales.

Liquidation, how long does it take and why?

We are often asked at RPG Business Recovery – how long does a Liquidation take?

We have broken this question into two:

  • How long does it take to place a Company into Liquidation (Creditors Voluntary Liquidation)?

  • How long does it take for a Liquidation (Creditors Voluntary Liquidation) to come to an end?

How long does it take to place a Company into Liquidation (Creditors Voluntary Liquidation)?

To place a Company into Creditors Voluntary Liquidation from start to finish normally takes approximately two weeks.  The process is relatively straightforward and starts with an initial advice meeting with a Licensed Insolvency Practitioner.  RPG Buisness Recovery provides these meetings free of charge and at this meeting all the options are discussed with the Directors and what impact this may have on the Directors going forward including restrictions on using a similar business name for example.

Once the Directors are happy with the advice that we have provided we return back to the Company and take formal engagement from the Company which includes the Directors holding a Board Meeting and at that Board Meeting the Directors conclude that the Company is insolvent and cease trading.  The Directors also sign notices to the Shareholders and Creditors convening meetings of Shareholders and Creditors, normally both meeting are held on the same day and normally 30 minutes after each other.  These meetings are normally convened for two weeks time, the Statutory requirement is to hold the meeting at least nine days later but we recommend that these meetings should be held in 14 days or so.

At this stage, if the Company has any employees RPG Business Recovery will make all employees redundant including the Directors and assist with making claims against the  Government for Redundancy, Notice, outstanding Wages and accrued Holiday Pay.  This is a specialised Government fund to protect employees of insolvent businesses.

RPG Business Recovery then sends these notices to all Shareholders and to all Creditors.  The notices are also advertised in the London Gazette.

During the next two weeks we produce, on behalf of the Directors, a report for Shareholders and Creditors.  This report includes:

  • A history of the Company from when the business started to when the business has ceased trading

  • Statutory information about the Company, including who are the shareholders, directors, registered office, company number etc

  • A summary of the last three years of Accounts

  • A Statement of Affairs, this is a statement similar to a balance sheet showing the real values of the assets and the liabilities of the Company

  • A list of creditors

  • A Deficiency Account which reconciles the last set of Accounts to the Statement of Affairs

The Meeting of Shareholders firstly receives a copy of the above report and then considers and passes resolutions which include placing the Company into Liquidation and the appointment of a Liquidator(s).  It is important to note that it is the Shareholders decision and not the creditors to place the Company into Liquidation.  At this meeting the Company is placed into Liquidation.

Immediately following the Shareholders meeting we hold the Creditors Meeting.  It is uncommon for creditors to attend these meetings these days, but occasionally a creditor may attend.  Although the Director is classed as the Chairman of the meeting, the RPG Business Recovery Insolvency Practitioner who is now the Liquidator will do most of the talking at this meeting and assist the Director with any questions asked.  A copy of the above mentioned report is presented to the meeting and explained by the appointed Liquidator.

How long does it take for a Liquidation (Creditors Voluntary Liquidation) to come to an end?

This question is not so easy to answer as it will depend on what is involved in the Liquidation process.  On average a Liquidation at RPG Business Recovery lasts less than 12 months, however, in certain cases where there are complex assets to realise and/or complex creditor claims to agree the process can take longer.  RPG Business Recovery can give Directors an indication of the length of time the Liquidation should last for at the initial advice meeting.

If your Company is struggling financially and you are unable to pay your debts as and when they fall due (cash flow insolvent) and/or your liabilities are greater than your assets (balance sheet insolvent) then as a Director you have an obligation to take urgent Insolvency advice as failure to act urgently may result in claims being made against the Directors personally and/or the Directors being disqualified for a period up to 15 years.  If in any doubt please contact us for an initial meeting.

Remember – only Licensed Insolvency Practitioners can assist you with formal insolvency appointments (this is a legal requirement) and are best placed to provide insolvency/debt advice.  Licensed Insolvency Practitioners are highly regulated and have professional indemnity insurance.  Unfortunately, there are a number of unregulated “debt advisors” advertising on the web that demand payment for their costs and then have to refer you to a Licensed Insolvency Practitioner for any formal insolvency who may also require payment and you could effectively end up paying twice unnecessarily.  In our experience, many debt advisors provide poor or wrong advice and in some cases encourage Directors to break the law.

At RPG Business Recovery we are Licensed Insolvency Practitioners and also specialists in providing businesses with turnaround solutions including avoiding liquidation.  Please feel free to contact us for a FREE no obligation meeting on 0161 608 0000 to discuss the options available to your company.  You are also welcome to contact either Alan (Mobile 07580 885750 or email acoleman@rpg.co.uk) or James (Mobile 07717 001087 or email jfish@rpg.co.uk) directly.

RPG Business Recovery is part of Royce Peeling Green Limited a firm of Chartered Accountants established over 100 years ago with offices in Manchester, London and North Wales. All Insolvency Practitioners at RPG Business Recovery are authorised and licensed by The Institute of Chartered Accountants in England and Wales.

To Liquidate or not to Liquidate

To Liquidate does not always have to be the only option.

RPG Business Recovery have advised a number of businesses recently that believed that to Liquidate (Liquidation) was the only option available to them.  Following an initial meeting with RPG Business Recovery, which is always free of charge, confidential and without any obligation, we identified alternative options available to them.

Firstly, if your business is in financial distress and you are struggling to pay your debts as and when they fall due (cash flow insolvent) you need to take urgent Insolvency advice from a Licensed Insolvency Practitioner.  Be aware of companies providing debt advice that are not Licensed Insolvency Practitioners.  They will not be properly insured and regulated to provide such advice.  All the Insolvency Practitioners at RPG Business Recovery are authorised in the United Kingdom by The Institute of Chartered Accountants in England and Wales (ICAEW).  Only Licensed Insolvency Practitioners are able to take formal appointments including Liquidation, Administration and Supervisors of a Company Voluntary Arrangement (CVA).

At RPG Business Recovery we provide good sound advice when it is needed the most.  We also explore all the non insolvency options first and specialise in keeping the business doors open for business.  To Liquidate a Company is a last resort once all the other options have been explored.

Over the past few months we have received requests from Directors to Liquidate their Company and some of the solutions we assisted in providing to Directors included:

  • Restructuring their debts over a period of time that was affordable to their business
  • Raising much needed working capital when their own bankers had said no
  • Proposing a Company Voluntary Arrangement (CVA)
  • Dissolution

At RPG Business Recovery we don’t claim to have a magical wand, but we do fully explore all the non insolvency options before recommending a formal procedure such as Liquidation or Administration.  The earlier that Directors take advice then this can greatly improve the options available to them.  Please feel free to contact us for an informal chat either at our offices or if you prefer at your business premises.

Remember – only Licensed Insolvency Practitioners can assist you with formal insolvency appointments (this is a legal requirement) and are best placed to provide insolvency/debt advice.  Licensed Insolvency Practitioners are highly regulated and have professional indemnity insurance.  Unfortunately, there are a number of unregulated “debt advisors” advertising on the web that demand payment for their costs and then have to refer you to a Licensed Insolvency Practitioner for any formal insolvency who may also require payment and you could effectively end up paying twice unnecessarily.  In our experience, many debt advisors provide poor or wrong advice and in some cases encourage Directors to break the law.

At RPG Business Recovery we are Licensed Insolvency Practitioners and also specialists in providing businesses with turnaround solutions including avoiding liquidation.  Please feel free to contact us for a FREE no obligation meeting on 0161 608 0000 to discuss the options available to your company.  You are also welcome to contact either Alan (Mobile 07580 885750 or email acoleman@rpg.co.uk) or James (Mobile 07717 001087 or email jfish@rpg.co.uk) directly.

RPG Business Recovery is part of Royce Peeling Green Limited a firm of Chartered Accountants established over 100 years ago with offices in Manchester, London and North Wales. All Insolvency Practitioners at RPG Business Recovery are authorised and licensed by The Institute of Chartered Accountants in England and Wales.

RPG Business Recovery proposed a Company Voluntary Arrangement and helped save over 3,500 jobs

A Company Voluntary Arrangement proposed by RPG Business Recovery helped save over 3,500 jobs.

RPG Business Recovery were invited by the Board of a £40 million turnover recruitment business to provide them advice on the Administration procedure.

The business had a debt due to HMRC of over £3.5 million and has over 3,500 employees.  Following a review of their business, the debt to HMRC was incurred as a result of one of their largest customers which represented over 25% of the Company’s turnover changing their policy internally which resulted in moving away from using temporary employees to permanent employees.  This customer confirmed that the Company had done nothing wrong to cause this change in policy.  This resulted in a loss of turnover of almost £10 million overnight.

During the next 12 months the Company clawed their way back from a turnover of £30 million to £40 million but during this twelve month period the Company was loss making and they accumulated arrears with HMRC very quickly.

We explored all the options with the Board and very quickly discounted Administration as there was a real risk that either the business would be sold to new management and the current Board may lose control of the business or worse still if no purchaser could be found the business may even close their doors and all 3,500 employees may be made redundant.

We assisted the Board with proposing a Company Voluntary Arrangement now that the Company had turned a corner and was now profit making.  The Company Voluntary Arrangement was based on making monthly payments from future profits.  The Company is now in a stronger position as their largest customer now only represents 10% of their total turnover and they are therefore at less of a risk if they were to lose another customer in the future.

We also worked very closely with their invoice finance provider throughout our work and they were fully supportive of the Company proposing a Company Voluntary Arrangement.

The Company Voluntary Arrangement was approved by the Company’s creditors earlier this year and following a recent review of the financials of the Company they are firstly very pleased with the Company Voluntary Arrangement and secondly are pleased to report that they are slightly ahead of the projections produced for the Company Voluntary Arrangement.

See another example of a Company Voluntary Arrangement (CVA)