Frequently Asked Questions

If you’re unsure where to start, you’re not alone. Many of our clients ask the same questions when they first get in touch: What’s involved and what they expect. We’ve answered some of the most common questions below to help you feel more informed before taking the next step

Can I be a Director of another business when I have just liquidated a business?

Yes, you can be a Director of another business today, tomorrow or next week – whenever you want. This is however reliant on, that you did not carry out any wrongful trading actions with the previous company – as this will be reported to the relevant authority (Department for Business Innovation and Skills) by the Liquidator, and you may be banned from being a Director for a period of time (usually between 2-15 years).

Is my personal credit file affected by liquidating a company?

There are NO implications to your personal credit file for liquidating a business.

What happens to the assets of the company?

Assets are valued by a 3rd party valuer, and then sold at auction if unencumbered. If there is finance on the asset, of course, the finance company is communicated with, and the asset may be returned or sold with the financier’s consent.

All funds from the sale of assets will be used within the liquidation and then distributed to creditors if funds are available.

If I liquidate a business, can I start another business without any debt?

In short – YES! You can be a Director of another business, and start trading another business without debt the next day.

You can’t, however, use the business name of the liquidated business or any similar name. Nor can you transfer assets, contracts, etc, over to a new business without paying consideration.

This is a really important area, and with the right advice, you can purchase assets, a business name and contracts for a new business. It is, however, extremely important that you get professional advice in this area.

What liabilities does a Director need to be aware of personally when they liquidate a company?

Things to watch out for from a personal liability perspective are:

Personal Guarantees – such as on bank loans, equipment finance, and retail leases
Director Loan Accounts – if the Director has taken money out of the business in the form of a loan, this is treated as a debtor (ie. Money owed) of the business
Illegal Dividends – if the company hasn’t made a profit, but dividends have been taken, this will be treated as a debtor (ie, Money owed) to the company

What are the tell-tale signs of having a company that is insolvent?

The warning signs of insolvency are:

Letters from lawyers chasing payment of a debt
Outstanding invoices that are left unpaid
Non-compliance with HMRC tax obligations
Being completely reliant on a bank overdraft
Directors not drawing a salary
Employee issues relating to late wage payments

What does a Liquidator do?

When appointed, a Liquidator actions the following:

Communicates with creditors
Collects any outstanding company debts
Works with company employees and assists them with their claims
Realises company assets
Prepares all relevant paperwork
Holds all creditor meetings

Can I liquidate my company myself?

No, you can’t. By law, a Licensed Insolvency Practitioner is the only professional who can be appointed to liquidate a UK business.

Is my company insolvent?

To determine this, there are 2 very simple tests.

Cashflow test: Can the company pay its debts as and when they fall due?
Balance Sheet test: Does the company have more assets than liabilities?

If the answer to both questions is NO, then the company will be classed as being insolvent.