Retiring and winding up a company is a significant transition that requires a lot of careful planning to ensure a smooth process. By addressing the key areas to manage, you can mitigate potential risks and costs. Here are our top tips to guide you through a solvent winding-up process.
Shareholders
Discussing strategy with shareholders, particularly if you’re retiring or the Company has served its purpose, is important. Sometimes there are minority shareholders to consider. Practical matters such as holding a general meeting, passing a special resolution and distributing funds, will all need thinking about as well.
Cessation of trade
Fully understanding and considering your assets and liabilities is crucial. Some liabilities will crystallise upon cessation and mitigating the impact of those should be thought about in the early stages.
Employees
Communicating with employees and providing adequate notice is vital as they are a significant stakeholder. Not only do you need to consider their settlements, you need to consider the pension scheme as it will also have to be wound up.
Tax
A shareholder will want to look at it from a personal perspective and consider what reliefs might be available to minimise the amount they pay. Timing may have an impact.
The Company’s tax position should also be planned. Early engagement with tax advisors as well as restructuring professionals is important.
Liabilities (including Warranties & Guarantees)
Liabilities should be reviewed and considered early in the planning and strategy phase, as they could materially impact the financial position of the winding up.
Liabilities, including taxes, should be paid before the winding-up resolution to limit costs. Statutory interest on liabilities, usually 8%, starts from the liquidation date and can increase winding-up expenses.
Assets
Some assets can be converted into cash to be divided up among shareholders. Other assets may need to be distributed ‘in specie’, meaning ‘in their actual form’. Consideration needs to be given as to how and what will be distributed to whom, and early discussions on anything that is not cash should be had with your advisors. For distributions in specie, valuations should be considered, and the tax consequences ought to be mapped.
Planning, communication and early management is crucial to mitigate costs, as well as being pillars for a successful process. Your trusted advisors, will be able to help you achieve success.
If you have any queries regarding the above, please do get in touch with Bethan Evans, or contact us via the form below:
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