Top Insolvency Questions from Members

Having worked in insolvency for many years, I’ve noticed that members of a company have similar queries when it comes to winding up their companies. Whether it’s about timing of the process or understanding their responsibilities during it, certain questions tend to come up repeatedly. To help address these concerns and provide clarity, here are the most frequently asked questions by members regarding their role and what they can expect when they wind up their company.

How do I close down my company to get my money out?

In Scotland, a solvent liquidation, more commonly known as a Members’ Voluntary Liquidation, is a vehicle used to close a company and pay the surplus assets to the shareholders, also known as members.

• The company’s directors can appoint a liquidator to wind up the company after the members have passed a resolution to wind up the company.
• Final accounts must be prepared and all tax matters finalised prior to liquidation.
• A notarized Declaration of Solvency, which is a statement of the company assets and liabilities, must be provided by the directors.
• Ideally, all creditors should be paid before the company goes into liquidation as they are entitled to be paid statutory interest on their debt from the date of liquidation until the date they are paid. 

Once in liquidation, the liquidator will realise any physical assets.  In practice, it is more common for the only asset to be cash at bank as the company will have ceased trading and dealt with all matters.  

When will I get my money?

In general, a liquidator will make a first interim distribution as soon as possible. The liquidator will likely only distribute an agreed percentage of funds held and hold some in reserve to meet their agreed fees and outlays, and for any potential creditor, particularly tax liability that might arise.

Once the liquidator is satisfied everyone has been paid in full and that all HMRC returns have been lodged and paid, they can take steps to pay the final distribution and close the case.

Will I pay tax on my distribution?

The short answer is yes.  Your distribution is income which should be declared to HMRC on your personal tax return and will be subject to income tax.

I hold shares in an insolvent company, will I get my money back?

It is unlikely.  Shareholders rank after all other creditors so will only receive something if all other creditors and the costs of liquidation have been met in full.  In an insolvent situation, it is rare that there are sufficient realisations to meet all the company’s creditors in full leaving a surplus to be distributed to shareholders.

Get in touch

Margaret Linn

Manager

I have 25 years’ experience working in Insolvency, both personal and corporate.  I advise individuals and company directors who find themselves in financial difficulty and am committed to finding a tailored solution that serves the…

Read more