Directors winding up their companies have many options available to them. It is important to choose the one option that is best for your company and your own circumstances.
A directors winding up is the process which a company goes through when it is insolvent and needs to be shut down. It is also known as a CVL or creditors voluntary arrangement.
A directors’ winding up is the last resort for a director who may have been struggling for some time to turn around the fortunes of the business. I look at many companies which have to close and it is clear that they have been technically insolvent for a number of months. They have in the main been kept afloat by directors not taking their own benefits, or even worse, putting their own loans into the business to keep it afloat, whilst they hope for that one order which will make them enough money to clear everything off. Of course, that golden egg rarely arrives and the directors’ own resources soon run out.
With nowhere else to turn the directors are left with little option but to call in the liquidator. Of course it could all be so different. If the director had spoken to us some months earlier, we would have cautioned him against putting that money into the insolvent business, and instead advised him, if the business was viable, to use that investment to buy out the potentially profitable elements from the company and re-start. This is known as a pre-pack sale.With the business effectively saved we would then have closed down the insolvent company, having advised its creditors what we had done and why. If there is a dividend to pay, this will have be made after costs of the liquidation have been taken. It is predicted that up to 1.5% of the company register may become insolvent this year. That could mean 40,000 companies face an insolvency issue of some sort. Many of these will be able to save something from the business if they take advice early enough.
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