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Options For Limited Companies

Sub pages : Should I Continue Trading? | Bankruptcy | Individual Voluntary Arrangement | Options For Limited Companies |

Dealing with Debts of a Limited Company (195KB)

There are a number of different options and processes that relate to limited companies that are insolvent or that may have serious financial difficulties.

Turnaround and Informal Arrangements

Corrective action such as company and capital restructuring, reducing costs, concentrating on core products, selling part of the business, and increasing financial control can help towards making a company profitable.

Informal arrangements can then be made with creditors to pay the debts off.

The business budget in this pack can help you with this approach.

The following are formal procedures that require the supervision of an authorised insolvency practitioner (or official receiver in some cases)

Company Voluntary Arrangements

Similar to an IVA for sole traders, this is a formal arrangement between the company and its creditors to settle its debts.

Administration

An insolvency practitioner is appointed to control the company with the aim of making proposals that lead to a turnaround and survival of the company or to come to arrangements with creditors which give a better realisation of the company’s assets (e.g. sale of the business).

Administrative Receivership

In this case an insolvency practitioner realises the company’s assets to repay a major creditor that has a security over the company’s assets (e.g. banks).

Liquidation

Liquidation is the process whereby the assets of the company are realised and distributed among its creditors according to their legal priority and entitlement.

For insolvent companies there are two main types:

in a creditors’ voluntary liquidation the directors pass a resolution to wind the company up. A creditors’ meeting is held to nominate the appointment of a liquidator and consider a statement of affairs;
in a compulsory liquidation creditors petition to the court for the company to be wound up.

Within six months of a company being put into liquidation, the insolvency practitioner has a duty to report to the Department of Trade and Industry (DTI) on the conduct of any director of an insolvent company who has been a director within three years from the date of insolvency.

This could lead to prosecution and disqualification if the insolvency practitioner finds that there has been wrong doing or fraudulent trading on the part of the directors.

Striking Off and Dissolution

A private limited company (Ltd) may apply to be struck off the companies’ register if in the previous three months it has not traded or otherwise carried on business.

Application may be made using form 652a supplied by Companies House.

This is only a brief summary. Phone us if you require more details.

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