How to liquidate your Pub
Pubs play a crucial role in Scottish tourism overall and are often at the heart of a community. They provide vital employment opportunities for local people but the sector is currently dealing with many complex problems that threaten business survival.
Like many other sectors, soaring costs coupled with declining sales due to the cost of living crisis have translated to reduced profits, poor cash flow, and the threat of insolvency. In some cases, serious financial decline is rapid so fast action is needed if businesses are to survive.
Poor cash flow and the threat of liquidation for pubs in Scotland
Poor cash flow is typically the underlying issue when businesses become insolvent so the fact that rising expenditures and lower turnover feature in the sector places many pub businesses at risk.
Sometimes a business simply isn’t viable for the future and there’s no option but to close down. When insolvency strikes but the business is still viable, restructuring debts through a Company Voluntary Arrangement (CVA) or obtaining flexible financing can help a pub to survive.
For insolvent pub businesses, Scotland offers a range of supportive measures that ensure business owners comply with insolvency laws and don’t unwittingly step outside of the strict legal requirements.
It’s crucial to seek professional assistance from licensed insolvency practitioners at the earliest sign of financial difficulty as this keeps more options open towards recovery.
Insolvency and liquidation in the Scottish pub sector
What is Creditors’ Voluntary Liquidation (CVL)?
When insolvent liquidation is the only possible route, a process called Creditors’ Voluntary Liquidation ensures the business closes down according to statutory requirements. It safeguards creditors from unnecessary financial loss but also protects company directors from allegations of misconduct – if they continue to trade when insolvent, for instance.
A licensed insolvency practitioner is appointed to administer CVL, as it’s an official process. Our highly experienced team at Scotland Liquidators are available for appointment and can establish whether this is the best option for your business.
What is Members’ Voluntary Liquidation (MVL)?
Being insolvent isn’t a prerequisite for entering liquidation, as sometimes owners want to move on or retire, and wish to close their pub in the most tax-efficient manner. This is where Members’ Voluntary Liquidation can be very helpful as distributions on closure are subject to Capital Gains Tax (CGT) rather than income tax.
During an MVL, pub assets are sold to generate funds for distribution and once the administrative element of the process is complete, the business closes down permanently by being struck from the register at Companies House.
Starting the liquidation process
Obtaining professional guidance from a licensed insolvency practitioner (IP) is mandatory when a business enters insolvency, but this type of support is available at any stage for Scotland’s pub sector.
Seeking this advice guarantees that pub owners take the right path and enter the most suitable process. Scotland Liquidators understand the issues and problems pub businesses are dealing with and can provide the reliable independent advice that’s essential.
