How to Wind Down a Small Business Step-By-Step
A Guide for Small Business Owners
I have helped, restructured and turnaround many businesses from financial ruin (London Fields Brewery to name one).
Most my clients had at some point gone through similar processes and through planning and professional help, we were able to turn the corner and still have a business at the end of it, even if in a different shape. Its not easy but can be done.
Numbers are staggering - 234,000 small businesses have stopped trading due to Covid-19, and 1 in 5 small businesses won't survive another lockdown, according to new research.
Although the chancellor has announced another round of emergency measures in a bid to help keep the economy going, I recently commented that he has simply not gone far and fast enough to get the financial support to those businesses in need. I have friends, who are small business owners and are looking at the inevitable doom that they might not survive and will go out of business.
With many small businesses seeing their income plummet (including my clients) with some considering throwing down the towel, I have decided to write this #howto post, hoping to give some advice and guidance, in what it is a long hard process.
So, if you are thinking about to wind up your company, stop for a moment and read this first.
How To Wind Up Your Small Business
Being an owner, means you need to take control of the situation and seek professional help as soon as possible if you want to wind up your small business. Although people might want to do this by themselves, in order to save costs, my advice is always, always... always seek professional guidance by contacting a licensed insolvency practitioner. Their technical advice will give you what is your best option for dealing with your company’s situation and debts.
What Is a Voluntary Liquidation?
For most insolvent companies, winding up of a small business involves a process called a Creditors’ Voluntary Liquidation (CVL). A CVL starts when the directors, and owners, decide to close their business as they cannot pay their creditors. The company must be insolvent for this to happen. Liquidating your company voluntarily via a CVL – as opposed to being forced into compulsory liquidation (avoid this route if you can) – will go some way to protecting your business reputation in the future.
Voluntary Liquidation VS Compulsory Liquidation
Compulsory liquidation happens when a company is forced by creditors, usually after the approval of a winding up petition in Court.