If a company struggles to keep on trading due to becoming insolvent the standard procedure for shutting it down is for the directors to appoint an Insolvency Practitioner to liquidate it. The IP will appreciate the value of the company’s assets and after deducting his fee distribute the proceeds amongst the company’s creditors. This procedure is effective enough if there are sufficient possessions within the business to cover the IP’s fee.
VAT. It’s very common for unscrupulous IPs to inform directors of such companies seeking their advice that they have no alternative but to appoint a liquidator and that is a legal requirement. This is exactly the situation I came across myself in some years ago. I had developed two companies trading out of the same premises in similar lines of business and both were in serious trouble.
I consulted several Insolvency Practitioners for advice, and received absolutely nothing but needs for almost £10,000 and the promise to make away all my problems go. I was told that the only path to close my companies and to stick to the right side of the law was to appoint an IP.
The problem was that I barely had £10, mind 10 grand never! After some research however, I realized which I have been lied to. There is absolutely no legal requirement to put an insolvent company into voluntary liquidation, no legal necessity to appoint an IP certainly. Effectively all that is required in law is a company finding itself to be …