What happens to company assets when closing a company?

If you’re considering closing your limited company, it’s important to consider what happens to the business’s assets. If you close your business via voluntary strike-off and any remain under company ownership they become the property of the Crown.

The voluntary strike-off procedure requires you to wind down your company’s affairs yourself, so selling or transferring ownership of any assets in good time is highly advisable. Liquidating a company is a different process that involves appointing a licensed professional to deal with the assets, so let’s look first at solvent and insolvent liquidations.

What happens to business assets during a liquidation procedure?

Solvent liquidation

If your company is solvent you may choose to close it by entering Members’ Voluntary Liquidation, or MVL. In this case, you would appoint a licensed insolvency practitioner (IP) to administer the process, and they would typically deal with the business assets by transferring ownership to a shareholder or selling them.

This might be to a third party, such as another business, but you may also wish to purchase one or more of the assets yourself. In any case, they must be professionally valued to ensure they’re sold according to the current market value.

Insolvent liquidation

Insolvent companies must enter a process called Creditors’ Voluntary Liquidation (CVL) in order to close down, and in this instance, the liquidator sells the business’s assets at a liquidation auction.

Again, they’re professionally valued before being placed for sale but the proceeds are used to repay creditors of the company rather than being distributed to shareholders as happens with an MVL.

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Company assets and voluntary dissolution

Definition

Members’ Voluntary Liquidation (MVL) is a legal procedure for closing a solvent company. This process involves the orderly winding up of the company’s affairs, paying off all outstanding debts, and distributing any remaining assets to the shareholders. It is a voluntary process initiated by the company’s directors and approved by its shareholders, typically used when the company has fulfilled its purpose or the owners wish to retire or move on to other ventures.

Legal Framework

The Members’ Voluntary Liquidation process is governed by key UK legislation, primarily the Insolvency Act 1986. This act outlines the procedures and requirements for legally winding up a solvent company, ensuring that all steps are taken in compliance with the law. Additionally, the Companies Act 2006 provides relevant provisions regarding the responsibilities and duties of directors and shareholders during the liquidation process.

Don’t Fall Foul of Unqualified Advice

Beware of the risks of unregulated advisers – only licensed insolvency practitioners can handle insolvency appointments and closure procedures from beginning to end. In contrast, unlicensed insolvency advisers will pass your enquiry onto a third party and charge a premium for doing so. Contact our licensed, specialist team today for FREE.

Obtaining professional guidance

Initially, you should seek professional advice before closing a company to ensure that you enter the most appropriate and tax-efficient process, whether that’s solvent liquidation or dissolution.

If there’s a possibility that your company is insolvent, as a director you’re legally obliged to cease trading and obtain professional assistance from a licensed IP – this prevents unnecessary financial losses for your creditors.

For more information and guidance on what happens to your business assets when closing your company, please get in touch with Company Closure. We have extensive experience in helping directors to close down their businesses in the most appropriate way and deal with assets correctly.

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With multiple offices across the UK and a vastly experienced team of business closure experts, you are never far away from the advice you need. Our Licensed insolvency practitioners provide free consultations to all directors and shareholders, and can quickly ascertain which closure method is best for your business.

We are licensed by recognised professional bodies and have helped thousands of directors over many years. Contact us today for your free company closure consultation.

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