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My take-away restaurant needs to go into liquidation

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How to close your takeaway or restaurant through company liquidation

The return to economic normality is slow and steady, and supported by the successful coronavirus vaccine rollout in the UK. The problem is that take-away restaurants and other food related businesses have been negatively affected by Covid-19 restrictions since the start of the pandemic.

An extremely lengthy exposure to adverse trading conditions and opportunities has made many take-away restaurants suffer such financial losses that liquidation may be the only option.

If your take-away restaurant needs to go into liquidation, therefore, what should you do?

Professional liquidation advice for take-away restaurant owners

Seeking licensed insolvency support is crucial if your business is in severe decline. Directors who fail to cease trading when their company is insolvent face severe penalties, and you must put creditors first.

Knowing when the company has become insolvent can be difficult, however, which is why early professional advice is key. You’ll also be able to find out your best options, which may be relatively wide if you seek advice at an early stage of financial distress.

Why is your take-away restaurant facing liquidation?

Coronavirus has caused previously profitable businesses to suffer huge loss of profit, but customer-facing sectors such as restaurants and take-aways have experienced unprecedented trading and financial problems.

The national and local lockdowns required to curb the spread of coronavirus, sometimes implemented at short notice, created an impossible operating environment for take-away restaurants, even though they had greater opportunity to trade than seated establishments.

The costs of applying social distancing rules and ensuring a Covid-secure restaurant are also high, particular when little money is coming in to the business. So if your take-away restaurant does need to go into liquidation, what can you expect?

Creditors’ Voluntary Liquidation for take-away restaurants

Creditors’ Voluntary Liquidation, or CVL, enables you to fulfil your legal duties as a company director, but could also offer you the opportunity to claim director redundancy pay. CVL is an official procedure that protects your creditors’ interests, whilst closing the company down in an orderly manner.

The process must be administered by a licensed insolvency practitioner (IP), whose main role is to ensure creditors receive as high a return as possible from the company liquidation. This is achieved by selling wholly owned business assets.

The remaining debts are written off, and unfortunately this means that unsecured creditors, such as suppliers, rarely receive a dividend from the liquidation process. Although it’s clearly not the ideal outcome for your business, CVL does offer you some control as a director, however.

You can choose when to place your company into liquidation, and also your own liquidator. A further benefit is the potential opportunity to claim redundancy pay as a director.

Redundancy pay for take-away restaurant owners

It’s not commonly known, but company directors may be able to claim statutory redundancy in the same way as their employees if they work under a contract of employment.

Your company must have been incorporated for at least two years, and there’s also a requirement for you to have worked for the company for a minimum of 16 hours per week in a practical role.

If your business also owes you money – perhaps your original investment – you may be eligible to make a claim. If you’re successful, you could use the redundancy pay to fund your company’s CVL.

Why is Creditors’ Voluntary Liquidation better than compulsory liquidation?

The stringent insolvency laws in the UK mean that you need to be very careful to take the correct course of action once your business enters insolvency. If you wait for a creditor to enforce liquidation rather than taking the initiative and protecting creditor interests, you could face disqualification or even personal liability.

This is a hugely important consideration if you believe your take-away restaurant needs to be liquidated, and should guide your actions moving forward. It’s also important to consider that liquidation may not be your only option, however.

So what other measures might be available?

Rescuing your take-away restaurant business

HMRC Time to Pay

HMRC is commonly a significant creditor in liquidation cases, and if you owe tax arrears you must contact them as soon as possible. HMRC operates a Time to Pay scheme, which involves paying your arrears in instalments over a few additional months.

Company Voluntary Arrangement (CVA)

This is a formal insolvency procedure available to viable businesses, and involves restructuring the company’s debts. This allows you to pay a single affordable sum towards your debts – typically for 2-5 years.

For more information on liquidating your take-away restaurant, and an assessment of other potential options, please contact our expert team at UK Liquidators. We offer same-day consultations, and will be able to let you know if you’re eligible for director redundancy.

Jonathan Munnery
Partner

If you are considering liquidation for your limited company, taking advice from a licensed insolvency practitioner can help you understand your options.

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Are you eligible to claim Director Redundancy?
As a Limited Company Director you may be entitled to claim Director Redundancy - Average UK claim is £9,000*.
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If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.

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