How to liquidate your Nursery

Delivering high-quality early learning is fundamental to our children’s futures and underpins their steady progress into mainstream schooling. Child nursery businesses in Scotland are dealing with numerous issues, however, that jeopardise the quality of the services they can deliver and restrict their growth.

Government underfunding and shortages of qualified nursery staff are just two issues that make the nursery sector a difficult environment in which to thrive, and that have been instrumental in causing serious financial decline in the sector.

  • Accessible childcare that’s flexible and affordable for parents is difficult to deliver without the right level of government funding. Costs for some private nurseries in Scotland are higher than the funding they receive, so it’s not surprising that they’re struggling to stay open.
  • A shortage of qualified nursery staff restricts the business’s ability to expand and develop. The Care Inspectorate’s ratio of adults to children required in a nursery setting cannot be disregarded so low staff numbers can severely limit the child places the nursery is able to safely offer.

What does insolvency and liquidation mean for Scottish nurseries?

When financial distress is unavoidable, a nursery business can quickly decline into insolvency. This doesn’t always result in liquidation but if they’re not able to recover, it might be the only option, and necessary to prevent further creditor financial losses.

Liquidation is also appropriate for financially healthy nurseries and is commonly used to close down a business that’s no longer required. It’s also a particularly valuable procedure for extracting the maximum profits when a business owner is retiring.

So what are these liquidation processes and how do they work?

Chris Bristow

Chris Bristow

Insolvency Expert

Chris is one of our most senior insolvency experts, and may well be the first person you speak to when you contact Scotland Liquidators. Chris has vast experience of assisting company directors and sole traders with all manner of financial and operational problems. He will take the time to understand the position you find yourself in and will explain the potential routes open to you in clear, everyday language.


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Liquidating an insolvent nursery – Creditors’ Voluntary Liquidation (CVL)

This is a voluntary liquidation process whereby the nursery owner places their business into liquidation due to unmanageable debt. Doing so protects them from allegations of wrongful trading and helps to meet the stringent legal requirements of this situation.

A liquidator can be appointed by the business owner, which offers some control, and nursery assets are sold for the benefit of creditors. The liquidator investigates the circumstances leading up to insolvency, so it’s important to seek assistance from a licensed insolvency practitioner (IP) as soon as possible to prevent any unintentional wrongdoing.

Liquidating a solvent nursery – Members’ Voluntary Liquidation (MVL)

When a nursery owner wants to close their solvent business, Members’ Voluntary Liquidation offers a tax-efficient way to do so. Distributions are taxed as capital rather than income, and tax liability can be further reduced if the business owner is eligible to claim Business Asset Disposal Relief (BADR).

Is it possible to rescue an insolvent childcare nursery?

Sometimes it’s possible to rescue an insolvent nursery and carry on in business. Company administration is one potential option that provides a ‘breathing space’ so that a plan can be made regarding the nursery’s future.

This might involve restructuring debt, for example, or streamlining the business via a cost-cutting exercise. Scotland Liquidators can guide you towards the best option if you’re a nursery business owner, whether you believe your business is insolvent, you want to move on to a new venture, or perhaps to retire.

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There are several options when it comes to closing a limited company and it is vitally important you choose the one which is right for you, your company, and your creditors. Whether you are struggling with rising costs, falling trade, or impatient creditors, we are here to help.

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