How to liquidate your Haulage Company
When the economy is thriving and trading conditions are good, the haulage sector in Scotland can seamlessly help businesses to meet their customers’ demands and make vital business-to-business connections.
The sector is intrinsic to the successful operation of businesses across all industries and is a vital part of the Scottish economy. Like many of the sectors they help, however, haulage businesses face serious external problems that can jeopardise their own success.
Challenges facing the haulage sector in Scotland
High cost of fuel
The soaring cost of fuel in recent years has increased the pressure on working capital for haulage businesses in Scotland and reduced what may have already been tight profit margins.
Strong competition
The highly competitive nature of the haulage sector means profit margins may be further compromised simply to win contracts. This negatively impacts cash flow and can lead to a slow financial decline as opposed to being able to operate with growth in mind.
Climate change targets
The cost to haulage companies of complying with environmental initiatives, such as the Low Emission Zones (LEZs) that have been introduced in major cities, can place significant strain on finances if they need to upgrade their fleet.
In light of these challenges, haulage businesses need to seek professional assistance at an early stage and obtain the guidance needed to stabilise the business before financial decline leads to liquidation.
What does liquidation mean for the haulage sector?
Liquidation for insolvent haulage businesses
When a business is insolvent, it means it cannot pay its bills as they fall due. Cash flow is compromised to such an extent that directors must cease trading straight away and seek assistance from a licensed insolvency practitioner (IP).
If rescue isn’t possible, the business is placed into Creditors’ Voluntary Liquidation (CVL) and closes down. Briefly, this means the sale of business assets to generate funds for company creditors.
Liquidation can also be used if a company director wants to close a business that’s financially healthy – they might want to retire, for example, or move into a different industry.
Liquidation for solvent haulage businesses
Members’ Voluntary Liquidation (MVL) is also conducted by a licensed IP, and again, business assets are sold. The funds from sale are then distributed to the company’s shareholders.
If a haulage business has around £25,000 or more in distributable profits, monies extracted from the business are subject to Capital Gains Tax rather than income tax, making this a tax-efficient way to close.
Is it possible to rescue an insolvent haulage business?
A business might be able to recover its financial footing and continue trading in some instances and formally restructuring debts can sometimes be an appropriate solution. A Company Voluntary Arrangement (CVA) may be suitable in this situation as it’s designed to allow businesses to trade their way out of difficulty over time.
Scotland Liquidators specialise in helping company directors deal with financial difficulty in the most appropriate way. We understand the issues facing haulage businesses in Scotland and provide the independent professional guidance needed.
