Why Would You Pick a Limited Company Restart?

Restarting a company

It’s no fun when you find yourself in debt and as a business owner it can seem like the end of the world. A bad period can end businesses that have been established for decades. Just look at retailers who have to shut their business because of market changes or businesses who experience financial distress due to outside factors.

The main thing to remember is that you are not alone, this is a situation that many company owners and directors find themselves in these days. Remember only about 50% of startups survive past their third year in business. Closure is not unusual, but can be remedied in a variety of different ways.

Closing your company and starting again is one of the options you have, but it’s probably best to remember that the law must be carefully considered as there are strict legal boundaries that define what you are permitted to do and what you are not.

Transferring ongoing business to a new company that is free of debt is often a fantastic option when it comes to solving financial issues.

Closing down a failing company means you are able to continue to trade within a new business. Sometimes it also means you are able to fund a new company using assets of your old firm, bought for your new one for more affordable costs.

As long as the law is followed, restarting a company can be a great way of continuing a business.

 

What can the benefits be?

There are many benefits to restarting a company, they can include:

• Get rid of bad debts.
• Having the chance to retain staff members, which will ensure your new company can restart with a team familiar with your processes and general management.
• Keep your former and regular customers.
• Release yourself from the obligations and ties to bad contracts.
• Keeping some degree of brand loyalty if clients and customers are aware of your new company.

 

What do you need to consider?

When you close a company and start off the process to start a new one, an application must go into Companies House, this will mean it will be compared to various legal and administrative factors that will ascertain whether you are able to continue with the process.

Here are a few factors that you should definitely consider:

 

Reusing your old company’s name

There are legal restrictions for using the same or similar name as your old business when starting up a new one. This stops directors from starting businesses, taking the assets and simply starting up again in a cycle.

If compulsory liquidation was used to liquidate your old company, it’s against the law to use the same name or something that could be construed as similar.

This makes it illegal for anyone who was a director of the company or a shadow director at any time 12 months before the company liquidation to be involved for up to five years afterwards in a company with the same or similar name.

 

 

Ensure you pay a security deposit to HMRC

If HMRC believes there is a risk your new company may fail to pay its tax on time, it may request a security deposit – such as a fixed security payment or a bond. If you fail to pay your taxes, HMRC will settle the balance with that security deposit.

 

Limited credit accounts

If your old company had a poor credit history and less than healthy relationships with its creditors, it is unlikely that they will provide a credit account for your new business without putting extra security in place. This could include advance payments or stricter, less flexible payment terms to ensure terms are met more quickly and reliably.

 

Selling goods and assets

It is fraudulent to sell the assets of an old company at a price lower than their market value. In some cases, a quick sale of assets can be carried out at a discounted price when the business is in distress. It is important that the business sale is legitimate, as creditors can sometimes use against the sale of assets at a discounted price in court.

 

Debt guarantees

A limited company is considered a separate legal entity, so you won’t be personally responsible for your company’s debts. However, as the director, if you have signed a personal guarantee and the company cannot repay its debts, you will be held personally responsible. If you have an overdrawn director’s loan account, the liquidator may pursue you to repay it.

 

Not sure what to do?

If your company is struggling with unmanageable HMRC debts, poor cash flow, or an uncertain future, you are not alone. We speak to company directors struggling with the same issues as you every single day, and we are here to give you the help and guidance you need.

Call our team for free, no-obligation advice today on 0800 975 0380 or book a free consultation