Nobody knows for sure who said the phrase “always leave them wanting more” – and it might have been Walt Disney himself, somebody who knew a thing or two about starting and closing companies. 

But the wisdom of the simile is why we keep using them and what is true for movies and the theatre is the same for successful businesses too – the hardest decision of all is knowing when to stop.

Mo money, mo problems

Nobody knows a business like its owners or directors. 

They have sometimes literally built everything up and have institutional knowledge and experience that simply can’t be replicated. 

But they are also human and like most humans, can encounter a wide variety of reasons why closing their company, even if it’s run well and making a profit, is the right one. 

  • Personal factors – everybody gets old, everybody gets ill and unfortunately everybody eventually dies. Directors are no exception and even if they avoid most of these universal trials themself, they may find they need to spend more time and money on other matters and their business might just be in the way.
  • Changing priorities – The pandemic changed society in a million big and small ways. Some were immediately apparent and others are still playing out and will continue to be seen in the months and years ahead. One thing that everybody will have experienced is questioning their own futures and ambitions and Covid-19 may have altered a lot of people’s timescales. Directors with ambitions and other interests or projects that more closely align with their long-term or newly found values might be ready to make a change that three years ago might have seemed impossible. 
  • Market conditions – It can be difficult to predict what will happen in the short, medium and long term and what might be a favourable trend today might turn disadvantageous very quickly. Several industries such as hospitality are finding the going particularly tough right now through a combination of high energy prices, inflation and lower customer spending – nothing at all to do with them but a reminder how sometimes the choice to close your business is made for you.
  • Operational issues – Any director of a hotel or a restaurant will tell you that the hardest task facing them right now is recruiting qualified and trained staff. This pushes up their overhead costs immediately as even if they locate some quality candidates, they will have to pay more to attract them which can impact on their own bottom line, making it difficult to function profitably going ahead. In some cases, it might be easier to close a business that is in the wrong sector at the wrong time than try to battle through.
  • Legal/regulatory issues – values change and laws eventually catch up which can impact businesses in the future. More customers are placing higher value on environmentally conscious businesses and those that take Environmental, Social and Governance (ESG) issues seriously.  Some directors might not like the direction their customers are going in but are realistic enough to realise that even if they wanted to, it might be too expensive to follow them so closing down before things get worse would be the right call. 

How do you close the door?

The most efficient and effective way of closing a viable and profitable company is by using a Members Voluntary Liquidation or MVL. 

Any company that can reasonably repay all outstanding debts within a 12 month period is eligible to pursue an MVL. 

Like any other insolvency procedure it has to be legally carried out by a licensed insolvency practitioner but it can be initiated at any time by shareholders who can appoint the IP themselves. 

They will then look to settle any outstanding legal issues, pay off any outstanding creditors and realise the company’s assets. 

There are also several other advantages to closing using an MVL. These include:-

  • Tax benefits – depending on their circumstances, shareholders could benefit from tax advantages as realised assets or funds could be treated as capital gains and taxed at a lower rate than income tax
  • Orderly process – an MVL is a controlled procedure which is beneficial for the company’s reputation as well as being able to manage the impact on employees, suppliers and customers
  • Protection – In a compulsory liquidation or a creditors voluntary liquidation (CVL) process, IP’s are legally bound to submit a report on directors conduct to The Insolvency Service based on their actions leading up to the liquidation. This could be problematic if they have not been attending to their duties correctly but in an MVL, there is no risk of any personal liability for any director as they have made the decision to close themselves and no report is necessary
  • Reduced costs – Unlike other kinds of liquidation process, an MVL can be less expensive as it doesn’t involve any court proceedings or necessary legal duties meaning that there can be more assets to distribute at the end

Even if you are quite happy running your business at the moment, we should all now be aware that we don’t know what tomorrow holds for any of us. 

If you see some dark clouds gathering or just want to cash out while the going is great then get in touch with us. 

We offer a free consultation for any business owner or director that wants to change their future for the better. We’ll go through their situation and be able to let them know what options and decisions they could make that can have a positive impact for them in the short, medium or longer terms. 

All they need to do is to make a convenient appointment and we’ll start doing the rest.