How should our Limited Company die?

Could you employ someone to do the work for you? Do you have any medical / loss of income type insurance? Have you had any meetings with your business manager in the past and did they recommend that you saw a financial adviser?

Not without working significant hours for no salary myself to advise them; additionally they would have to be on site and we work from home. Ultimately not possible or practical.

No key man insurance for the company. A few ppp's that will pay personal credit cards. Nothing that will either provide funds for the company, myself or my family whilst I'm still alive.

The business manager has always been happy to leave it a while - seeing a financial adviser has been on the cards from the point at which there was spare income - but this hadn't transpired; I have a couple of savings plans and an endowment (the mortgage does not depend on it) and we are about 25% mortgaged. When I die my family will be 'ok' ... though if I died on a bus rather than from the cancer they'd be much better off, as I have an accident policy too.

Money went towards the children (son just left uni, daughter coming up to GCSEs). I'm only 42, otherwise was fit and healthy - you sort of think you've got plenty of time.

Ultimately, we'll manage personally somehow, but we need to do the right thing with the business: within the law and promptly.

Richard

I take it that you have not guaranteed any loans or overdrafts to the bank but if this is the case they will take action to get their money back.

This was the disappointing conclusion I reached. What do you look for in an insolvency practitioner?

I'm pleased to say the business doesn't owe the bank anything. The only annoying issue is that the business bankers are also our personal bankers, so there'll probably be an impact just because they know the company's no longer trading.

Richard

In message , Richard C writes

I see no point. The Government is your only creditor.

No, but you would likely be chased to the extent of your loans.

I cant see it happening here so long as you havent taken excessive dosh out of the business at the expense of those creditors

Yes. As the bank is not a creditor then it wont worry them, but your future ability to borrow personally may be effected if they dont see any replacement income coming form elsewhere. When I was lending dosh I always tried to get both business and personal banking becuase then I'd got them by the short & curlies but now I am on the opther side of the desk I always advice clients against banking at the same place. Too late for you now though.

I dont think you need worry.

Id see an insolvency practitioner but get a quote from him first.

I accept that that is likely. And not really unreasonable.

If there'd been excessive dosh to take we wouldn't be in this situation.

Yes. But it's such a two-edged sword. If you're a good personal customer then they're more than happy to arrange an account for a start-up with minimal fuss. That was 10+ years ago - just should have changed it since. We should be able to generate a new source of income though.

They seem to start at about 3k, which seems like a lot, but may not be (the more I look at the situation and what they have to do). Is this good/bad/average for a small company?

This appears to be (for anyone else in the same situation) a good reason NOT to pay off any debts first - as that way there is money in the pot to pay the insolvency practitioner. In our case that is likely to be creamed from the repayments of the directors' loans. If we were to pay them back now and clear a debt then there'd be nothing to pay the IP with. Additionally, even though the only people owed are the government we might still be seen as giving preferential treatment to one creditor (e.g. VAT) over the other ... That's where I've got to so far.

Thanks for your comments John

Richard

Why do the directors "owe" the company money? Wouldn't this have been income?

Another route is IVA. Particularly if you want to continue trading and don't want or need credit from your suppliers. You will need to contact a Insolvency Practioner and it may be worthwhile asking for a quote. Make sure you have a list of creditors and their addresses handy. IPs charge serious amounts of money though.

If you are intent on closing the business and feel it's unlikely, due to health, you want to continue trading then liquidation is perhaps the best option.

In message , Fred writes

No, it is common for directors to make withdrawals from the business as loans from the company although there are limits as to how much the HMR&C will let you get away with. In this case it makes sense because the company obviously hasnt got the ability to pay the directors enough salary

??? But the individuals arent in any financial difficulty.

I should have left a smily. If the company has enough money top give the directors a loan then it's got enough money to pay them the salary.

sorry - I meant company voluntary arrangement or CVA.

In message , Fred writes

Not so. Cash held and available profit are not the same thing.

Fair enough.

Well it hasn't lent the directors the money in the last few months. And of course lending money to the directors (rather than paying them) means that the money still belongs to the company. Further, the directors (in this instance, at a push and with tight belts) are able to pay the loans back. This will, however, still leave a shortfall of about 19K and to continue to trade would still accumulate further debt. We fully expect to pay the money back - it's a case of strategy (see one of my earlier posts). Providing the loans wasn't what put the company in the position of failing.

I'm not shifting blame anywhere :^) That said, if I'd been an employee of (say) HM Customs & Revenue for the last 10 years and then I'd got this cancer the public purse would be making my existence considerably simpler than it is. It's the flip side of 'if I hadn't got it I might be earning ten times as much as if I were working for HM Customs & Revenue'. Can't sit round and moan: it's a gamble - I lost. The trick is to not get bogged down - the typical scenario for what I have is that I've only got a couple of years to not get bogged down in. So it's time to move on.

Richard

"John Boyle" wrote

But you don't need to have made a profit to pay a salary - were you thinking about *dividends* instead, where you *do* need to have made a profit?

In message , Tim writes

No, I was putting it terms that I hoped the poster would understand. (I dont mean to demean him I just had a feeling he didnt have the whole concept).

"John Boyle" wrote

Now I'm confused - why did you say "Not so" to Fred's post?

In message , Tim writes

You do seem to get that way very easily these days!

Ok, I will put it another way. A directors loan is a balance sheet item whilst salary is a P&L item.

"John Boyle" wrote

That doesn't invalidate Fred's point though, does it?

Thanks for your support. I understood dividends should be paid out of profits. However salaries can be paid out of share capital. Hence if the company can "loan" share capital, then it also has the cash to pay a salary.

However I could be wrong. It's clear there is some doubt that this "loan" could be regarded as salary. Obviously IT and NI should be paid on it and if there's insufficient cash in the company to pay IT and NI then the directors my have to pay it themselves. However I feel it is worth asking an accountant on his view of whether this "money" can be called "salary" and whether it has to be paid back. If it was a reasonable reward for work done I'd doubt if it needs to be paid back.

In message , Fred writes

Lets put this in the context of the OP. He has a company that is both insolvent and is trading at a loss. Despite this it has some cash in its balance sheet. To pay a directors' salary at the expense of creditors would deprive the company of assets at the expense of creditors and would be frowned upon by a liquidator and if excessive would be illegal. On the other hand a loan to a director does alter the balance sheet at all and so long as the director repays the loan (as the OP claims he can) then nobody suffers. So, having cash does not necessarily mean you can pay a salary.

"John Boyle" wrote

If the worst comes to the worst, he could be asked to pay it back. But is it really "illegal"?

"John Boyle" wrote

Why not? If the cash is there, he could pay it as a salary. If the worst does happen, then he may be asked to pay it back by the liquidator, but that'd then just be the same as if it were paid as a loan. If things turn for the better, it can stay as a salary all along...