Setting up a limited company is a relatively easy process; it can be done within a couple of hours and not too much hassle. Closing one down on the other hand? That’s a bit trickier…
Liquidation is the process of bringing a business to an end and distributing its assets to its claimants. There are a variety of ways to liquidate your company and one key rule – it must be done by a licensed Insolvency Practitioner (IP) – liquidator. The liquidator is responsible for taking control of the company and distributing funds in order to repay as many creditors as possible. Only after creditors have been paid can any remaining assets be distributed to shareholders.
So why are liquidations so detailed? During liquidation, the IP will investigate the director’s conduct as well as the company books and records. This means that if the company is being closed in order to cover up tax avoidance or fraud, it will be discovered. In simple terms, you can’t just take a load of money out of a failing company and then close it to hide the evidence.
What about if you ignored all that and just did it anyway?
We can tell you now, it probably won’t end well…
A director of a Leicester payroll service was sentenced to an 11-year director disqualification after his company was discovered to be part of a tax avoidance scheme. The company operated for only 11 months before it was voluntarily wound-up, when the problems became apparent. The director refused to co-operate with the liquidator and denied access to company records. This meant that investigators were unable to tell what proportion of the £37m that had left the business bank account was for genuine company expenses. Put simply; the director was spending approximately £3.3m per month on “business expenses” through the company account but refused to reveal on what the money had been spent.
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