Self Liquidation?

E

exowner

Guest
Hi,
We own a small limited company, the recession has wiped us out.

We are the largest creditor, the company owing us roughly €100k that we invested in the company. The only other main creditor is revenue.
Do we have to appoint a liquidator or can we liquidate ourselves if we are the biggest creditor?

The company owes us over 100k and revenue 50k and that's about it, there are no other creditors, and as we're not paying our mortgage, we've taken our child out of creche and can't pay any of our utilities or bills and are unemployed now, we generally don't have the 10-15k plus to give to a liquidator!!!!

As the largest creditor, can we self liquidate or do it anyway cheaper?

Thanks
 
what exactly is left in the company - Cash/Assets. Can you pay your creditors?
 
Hi Exowner

Sorry to hear you are having such a tough time.

A lot depends on whether the company has any funds.

You can go for a voluntary strike off of the company which will crucially require a letter of no objection from the revenue. You will also have to make a declaration as directors that the company has no assets and no liabilities.

With regard to the revenue you will need to come to some arrangement with them to pay them off. I believe that the revenue are bared by statute from forgiving the actual tax liability (but can waive penalties on certain occasions). But for this reason if you cant pay I believe they will insist on a liquidator because they have no other way out.

With regard to the money that is owed to you, you may forgive this debt to the company. But be careful because it will depend on whether this amount owed to you arose as a result of trade transaction or as a result of a loan. If it was as a result of trade (ie the company bought stuff from you) and you took a deduction previously against corporation tax then forgiving this debt may trigger an additional corporation tax liability. You may however have CT losses to cover this.

If you can manage the above and the company has no assets and liabilities you can go for a simple voluntary strike off.

If you cant do this then you must go the liquidation route. You cannot do this yourself. You basically hand the company over to a liquidator who is appointed at a meeting of the creditors. Also if there is no funds in the company to pay a liquidator you will have to pay him yourself. Also the liquidator must make a report on the conduct of the directors to the ODCE.

I think paying a liquidator will work out to be the cheaper option.

Hope this helps

DB
 
Exowner,

DB is correct.

As directors of the company you have a fiduciary duty to wind up the company by virtue of the fact that the companies liabilities are in excess of its assets, and it cannot pay its debts as they fall due.

You should cease paying any of your creditors at this stage and make arrangements to have the company put into liquidation. The liquidation will cost approx €10K - €20K depending on the level of work required by the liquidator, but the alternative is that you will have to discharge all the creditors, namely revenue of € 50K, and still place the company into liquidation, or voluntarily strike off the company. At that stage notwithstanding the fact that it will be a smaller exercise, there will still be an associated cost on each.

It’s a fact of life that businesses fail, and it is simply more prevalent in times of recession. You are in the majority of people who simply operate the company as a sole trade operation, where the liabilities of the company are perceived to be personal liabilities. The liabilities of the Company are simply that, liabilities of the company, and not personal liabilities.

Provided there is no issue of reckless or fraudulent trading it would appear that the demise of the business was resultant from the circumstances of the time, and if this is the case, you are already down your investment without sinking further monies into a hole.

On the issue of the eligibility to be a liquidator, a liquidator must be an independent person, and have no connection with the company or any of its officers. Generally a liquidator would be an accountant, but there is no legal requirement for this.

Regards,

STCO
 
Sorry to hear that you are having a tough time. As someone who has suffered in the past I can only say that at some stage the pressure will ease. Try to remain clear thinking and look at some of the more positive things in your life, health, family, etc..

You might get a cheaper liquidator if you used a 'provincial' accountant. The actual work involved in a liquidation is very little. A client of mine is getting a 'solvent' liquidation done for €2,000 plus VAT. An other insolvent company was done for €6,000 plus VAT. Even at that the liquidator had a great pay day.

The concept of doing your own liquidation is not possible. If you voluntarily wind up the company you have to make a statement such as 'the company has no liabilities' and you need a letter of no objection from the revenue - unlikely to get this.
If you just leave the company alone and let it be struck off by the CRO then you are liable to prosecution by the ODCE - potentially huge fines and also creditors can follow the directors personally. Some barristers in Dublin are having huge success in persuing non-compliant directors. This is only done where the directors can afford to pay.

The basic fact is that by acting as a director you have taken on an onerous responsibility which now gives rise to a potential personal liability of €10k. People need to beware of what they are taking on before agreeing to act as directors.
 
Companies who operate in a difficult environment should always keep a certain amount of rainy day money. Would be useful in an instance like this to help pay the liquidator. Any progress by the OP in this case? Am interested.
 
An option is that you go to your own accountant and seek advice, very often accountants have with contact liquidators who may do a liquidation at a reduced cost.

Provided no creditors have been preferred and the insolvency of the Company is down to current economic climate, your liquidation would be straight forward. However, 6k plus VAT, in my opinion is very cheap. The Liquidator does has considerable outlays in respect of advertising and storage of books and records of the Company for a period of time. Having experience in this area, the cheapest you could do a 'clean' liquidation (insolvent Company) would be for 8k-10k plus VAT.

Solvent Liquidations are another type of wind up but are considerably cheaper.
 
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As an interested bystander, I'd like to know what happens re the €50k owed to Revenue. Are the directors liable for this debt and is there an indefinite lifetime?
 
If Company goes into Liquidation, and there is cash left over after the Liquidation fees, the Revenue would be entitled to a dividend. Otherwise, the Revenue lose out and the tax payer takes the hit.

A consequence of this is that the Revenue can challenge the Director of the Company in respect of other directorships he may have and may also conduct a review of that directors affairs, audit of returns etc.
 
You cannot self liquidate the company, but as you have no funds and sound like decent people I would suggest that you at least contact the revenue by phone and in writing explaing your position.

The Revenue are generally very nice people! I am sure they are coming accross this a lot and have to be prepared to forgive people. However, they will ask the question about why are they the only creditors apart from your goodselves who is owed money!

I think you can then call a meeting seeking to put the company into liquidation. however, as you have no money to pay the liquidator no liquidator will be appointed.

But be warned if the Revenue believe that you should have some money left in the company even if you are owed 100k they may seek to appoint a liquidator to go after you to get their 50k back, so perhaps it would be worth paying a liquidator a few euros so that you can sleep at night.
 
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