“My business has failed, there’s no money left but I’ve got six employees who have employee entitlements. What can I do?”
This is quite a common problem these days. There’s often a bounce back loan to repay as well.
If a company simply fails and does not get formally liquidated by an Insolvency Practitioner (IP) the employee entitlements would never get paid. A director may cease trading a company and this is how it could stay for many months. Eventually, Companies House would take steps to strike the company off the register providing an objection had been received by a creditor (who could be a former employee or bank).
If any objection has been received the company will remain on the register and will need to file any outstanding accounts, otherwise the directors would face significant fines.
The solution is that the company enter formal liquidation. The director could wait until a creditor took action to wind up the company through the courts (a compulsory liquidation) which could take months or never happen.
Alternatively, the director could appoint an IP to commence a creditors’ voluntary liquidation. The advantage of this process is that;
• it is immediate and therefore the timetable is totally controlled by the director,
• the employee claims will be paid by the Redundancy Payments Office (RPO),
• preparation of accounts would no longer be required
• and ultimately the company would be struck off as part of the process
The downside, of course, is that the IP’s fees would need to be paid for, assuming there are no assets of the business. Our fees for a CVL start from £2,000 plus VAT. We’d prefer these to be paid in one go but would look to take instalments if it helps.
Many companies are facing issues like this now. A CVL is often the best solution. I’m always around to chat through a particular set of circumstances to see if we can help. This won’t cost a penny!
Call me (or any of the G&K team) at any time for a no obligation chat or meeting on M: – 07786 965 009.