I want to close my company because of Coronavirus: What can I do?

The coronavirus pandemic has had a huge impact on not only everyday life, constricting the way we work, shop and socialize, but the impact it has had on the economy and businesses is huge. If you’re the director of a company, it has mostly been a case of embracing change, taking the help and adapting. But with the changes lasting for almost 18 months, many businesses are at the point of no return and facing severe financial difficulties. So what can you do if coronavirus has caused your company to collapse?

How much effect has the pandemic had on your company?

For many high street traders and small businesses the pandemic has caused huge disruption. Many have been unable to trade efficiently, or have only been able to do so at a minimised capacity. It has disrupted cash flow, business operations and has left lots of companies facing problems from their creditors. Likewise for suppliers, often demand has been lowered, which has meant that they have also been suffering.

Other businesses haven’t faced as many problems and have thrived in the pandemic. Lot’s of businesses have adapted, whether it’s meant changing the way demand is delivered, or changing the way the business operates, many have embraced working at home and downsizing their business operations to be more efficient.

Although the UK government have given all the support they can, with schemes such as the Bounce Back Loan and the Furlough scheme, many businesses are on their last legs and no amount of additional loans or support can pull them out of trouble.

My company can’t continue trading

If the pandemic has impacted you negatively and pushed your business to a point where you can’t pay your liabilities as and when they fall due, the company could be insolvent. Even with the government-backed support, or potential repayment plans, if your company is insolvent and simply can’t continue trading, the best-case scenario may be to shut up shop and close the company before things get any worse.

Although there are options such as a company voluntary arrangement (CV), which can pool your debts together. If the company genuinely doesn’t have a future, a creditors voluntary liquidation (CVL) is the procedure used to close a company. A CVL will see the company formally closed with its debts written off. Any debts the business does have will be paid off by realising assets remaining within the company.

My company has been thriving

If your company has been thriving and the pandemic has pushed your company forward, then it will be classed as solvent. Although it’s great news for company directors, they may also see now as an opportunity to take their money out of the business and retire. Similarly, if the additional hassle of Covid has changed the way the business works too much, they may not want to be a part of the business or the industry.

If a company is solvent and the director wants to withdraw their cash from the business, the closure process is different. It’s known as a members voluntary liquidation (MVL) and is the process used for closing down solvent companies. If the company has more than £25,000 in cash and assets within the business, an MVL is the most tax-efficient way of closing the company, providing the director with the benefit of entrepreneur’s relief. The process allows for a fast release of distributions and funds to the shareholders.

To summarise

The pandemic has caused such problems within businesses and affected so much how not only business operates, but also how we live in general. If its caused such a negative problem to your business, perhaps now may be the time to bite the bullet, pull your head out of the sand and stop trading before things get worse. Or if the pandemic has pushed your business on but you don’t feel it’s what you want anymore, now may be the time to close the company, look for a new challenge and withdraw your cash from the business.