Not only has the coronavirus pandemic completely changed the way we interact on an everyday basis, with different ways of socialising, shopping and working, but it has also had an enormous effect on the economy and the way businesses trade. For company directors, it has either been a time of embracing the change, struggling through it, or having to shut up shop. With so many businesses facing severe financial distress, many are facing the grim reality of having to shut up shop and call it a day. So, if you want to close your company because of coronavirus, how do you do it?
Is the business financially stable?
Many companies have thrived in the pandemic, whether that has been through a boost in demand, as shoppers change their way of buying, or be it through a change in business operations as some downsize and embrace working from home. For others, despite all the help from the UK government, it simply hasn’t brought enough stability and with such restrictions on trading, businesses haven’t been able to stay stable.
The financial stability of a company determines what routes are available when it comes to moving forward, and if you do decide you want to close the company, then the best means of doing so.
The business isn’t financially stable
With lots of businesses struggling to maintain a positive cash flow because of a break up in trading or a reduced workforce, creditors have been chasing down businesses for monies they’re owed. Suppliers and landlords have been looking for payments as everyone continues to suffer through the pandemic. Its meant a lot of companies are facing financial distress as they have bills mounting up and no way of trading out of it. For directors in this situation, the last thing anyone should do is bury them in the sand and hope it all goes away.
Despite government aid through the furlough scheme and bounce back loans, companies still find themselves in this position. For those that do, there are two ways to potentially get out of trouble. If you truly believe that the company has the potential to trade its way out of trouble and could continue moving forward, a company voluntary arrangement (CVA), would allow a company to pool its debts together and continue trading, paying all of its creditors with monthly repayments. The alternative is a creditors voluntary liquidation (CVL). This is a liquidation procedure, which sees the company completely close its doors, with all the assets within the business sold and the cash raised then used to repay the creditors. If the company has simply become unmanageable, this will be the best way to move forward.
My company is thriving but I still want to close it
The pandemic has of course caused some companies to thrive by changing their business models, it has meant some been able to massively increase trade, as shoppers change their styles and have been forced to stay indoors. However, for some, it’s not quite the business they want, or the success has meant they want to remove their cash within the business.
For directors of solvent companies, who are able to pay all of their debts, but want to remove the money they have in their business and close up shop, the process used is called a members voluntary liquidation (MVL). This is the most tax-efficient way of closing down a limited company, as well as the quickest, with shareholders getting their money and the company is closed usually within 12 months.
Final few words
The pandemic has changed so much over the past 18 months and it has had an enormous effect on businesses and the economy alike. For those who have dealt with the stresses, whether positive or negative, thankfully there are means of closing the company or solutions on dealing with problems within the business.