How to liquidate your Transport Company
The transport sector weaves its way inconspicuously into our everyday lives, seamlessly moving people and goods from one place to another. If one link in a transport chain fails, however – an overdue train that makes us late for work, for example – it becomes clear just how crucial the sector is to Scotland and its population.
Some Scottish transport businesses face additional issues and cost pressures due to the diverse geographical nature of the country and the need to link vast rural areas in the highlands and islands. So what might happen to businesses that are struggling to make ends meet?
Insolvency and liquidation in Scotland’s transport sector
Insolvency is a serious situation for a business and typically occurs due to poor cash flow. This means the business can’t pay its bills, and as a result, it becomes at risk of being forcibly closed down by a creditor.
The good news is, there are ways that a company can recover its financial footing before liquidation becomes the only option. Formal procedures, such as company administration and debt restructuring, allow a business to repay its creditors affordably. When the company’s debts are unmanageable and there’s no way back, however, liquidation ensures it closes down according to the UK’s insolvency laws.
Liquidation is also used for solvent businesses in the transport sector and is a tax-efficient way for business owners to extract their profits if they want to retire or move on to a new venture.
Liquidation for transport businesses in Scotland
Creditors’ Voluntary Liquidation (CVL) for insolvent businesses
Creditors’ Voluntary Liquidation enables company directors to prioritise their creditors’ interests, as required by law. A licensed insolvency practitioner (IP) conducts the process and ultimately removes the company name from the official register.
The business’s assets are valued and sold at auction, and these funds are used to provide a return for unsecured creditors. Part of the liquidator’s role is to investigate why the company failed and the voluntary nature of the process means that directors can demonstrate they’ve placed their creditors’ interests first.
Members’ Voluntary Liquidation (MVL) for solvent transport businesses
Members’ Voluntary Liquidation is a procedure for transport firms that are financially healthy and can repay their creditors within 12 months. Again, it’s administered by a licensed IP.
In a similar fashion to CVL, solvent liquidation involves selling the business’s assets to generate funds and is a tax-efficient way for shareholders to extract the maximum amount of profits.
This is because distributions from an MVL are subject to Capital Gains Tax (CGT) rather than income tax and liability may be further lowered if a shareholder can claim Business Asset Disposal Relief (formerly Entrepreneurs’ Relief).
How to start company liquidation in the transport sector
Insolvency can strike very quickly, so speed is of the essence for transport businesses experiencing financial decline. Seeking advice from licensed insolvency practitioners is mandatory once a company is insolvent, and doing so quickly can only benefit creditors as it minimises unnecessary financial loss.
Scotland Liquidators are licensed insolvency practitioners. We help directors in the transport sector by providing reliable independent advice and conducting solvent and insolvent liquidation procedures.
