When should you consider solvent liquidation?

When to consider solvent liquidation.

Retirement

A common reason for considering solvent liquidation is retirement. If there is no successor to take over your company, solvent liquidation can help you extract value from your no longer needed company. This can provide you with the cash you need to retire and peace of mind that your company has been professionally dissolved.

Asset realisation and tax benefits

There may be a significant amount of assets tied up in your no longer-needed company. Solvent liquidation is the only way you can realise these assets in a tax efficient manner.

There is also the ability to apply for Business Asset Disposal Relief. If you qualify you can make significant savings through a low tax rate of 10% on your qualifying gains from the company assets.

Returning to employment

Another common reason for considering solvent liquidation is returning to employment. By liquidating your company, you can be confident that all your affairs have been properly taken care of before you start your new employment journey.

Legal requirements for solvent liquidation.

Solvent liquidation has several legal requirements, designed to ensure a fair process for you and your creditors.

Your company must:

• Have been trading for a minimum of 24 months
• Have at least £25k net assets after all debts and costs have been settled
• Be solvent and not under threat of insolvency

You will be required to:

Sign a declaration of solvency

As a director, you and a majority of the other company directors are required to sign a declaration of solvency. This official document confirms that your company will be able to pay all its debts within 12 months. Once completed the document will be sent to Companies House.

Seek a shareholders’ resolution

The shareholders’ resolution must be passed by a minimum of 75% of company shareholders (with entitlement to vote) to be able to proceed with the solvent liquidation.

Appointment of an Insolvency Practitioner

You may wonder why an Insolvency Practitioner when proceeding with a solvent liquidation. This is the title of the licenced professionals who carry out all solvent and insolvent voluntary liquidation processes. A company cannot undergo a solvent voluntary liquidation without the appointment of an Insolvency Practitioner.

Notifications

During the liquidation, all creditors are notified of the liquidation.

Notifications of the shareholders’ resolution to liquidate your company and the appointment of an Insolvency Practitioner will also be made in the Gazette.

Statutory reports and final account

The appointed Insolvency Practitioner will prepare a report which provides details of the liquidation and a financial statement.  This will be produced every year and when the Insolvency Practitioner is ready to close the liquidation.  A copy will be sent to all shareholders and filed at Companies House.  Then usually 3 months later your company will be officially dissolved.

Insolvency Practitioners and solvent liquidation.

The Insolvency Practitioner will prepare and carry out the solvent liquidation and take care of the official tasks.

Here are some of their key responsibilities:

• Advice and guidance to directors before the liquidation
• Preparing official paperwork such as a declaration of solvency and official notices
• Asset valuation and sale
• Distributing net asset proceeds
• Final reporting

Contact us today to get your company’s solvent liquidation started.