Significant Things to Consider as Post-Liquidation Practices in India
Are you a company director who requests to shut down their business? Or you are forced by creditor pressure to close your company? In any of the liquidation cases, it becomes essential to move forward and consider proficient Post-Liquidation Practices. Check out some of the critical things that you must consider after you have liquidated your company.
Business liquidation can never be a pleasant experience. Nevertheless, when the situation demands so, you need to do it in the right way by following certain post liquidation practices.
Personal Assurances
In most of the cases, the director of the company either significantly or unintentionally guarantees one or more debts of the company. Being the company’s director, it’s your responsibility to plan how to deal with all these guarantees personally unless the liquidation practitioner approves there will be a substantial distribution to creditors.
The foremost action of the company’s director should be to request a final copy of the guarantee. The creditor would not be able to pursue further unless he produces a copy. In case, if the guarantee stands, it’s recommendable to engage the creditor at an initial stage for doing a deal.
Setting Up a New Business After Liquidation
The act of liquidating a company by yourself does not forbid you from setting up a new company after liquidation. However, in setting up a new business, there are several things you must consider:
- The insolvency legislation prohibits companies to use a company name that is the same or quite similar to the company in liquidation. Doing so is not only a civil offence but also a criminal offence.
Mainly, it involves trading and website names.
- You may need to rebuild your relationship with the liquidated company if your new business requires goods from the common suppliers. Moreover, suppliers may request you to trade with them on cash until they are comfortable to grant a credit account again.
Reversible Transactions
If you find a transaction unsuitable for your company’s productivity, you can call upon directors to repay dues to the company. Such cases may include:
- Undervalue transactions where funds or assets of a company are less than worth amount upon selling.
- Preference payments where any of the relative or friend gets money from the company before liquidation instead of paying HM Revenue, Customs, or trade debts.
- Insolvent Loan Accounts where funds have been drawn from the company, but not accounted as dividends.
- Misfeasance where company dues have been utilised for personal welfare without being sanctioned as expenses.
- Unlawful dividends payments where dividends have been paid to the company stockholders without satisfactory reserves to justify payments.
If you ever come across any of these transactions, it’s advisable to layout your clarifications evidently and rapidly. You need to resolve resentment with the least expense possible for all parties. In case, if you find out that you have a loan from the company money, consult the liquidator at a primary stage.
HM Revenue and Customs
Before permitting you to submit returns, HMRC may request a bond or some deposit if certain issues arise with the tax debt level. In case, if you are unable to submit returns timely, you would not be able to trade lawfully. Moreover, if HMRC demands a bond, it will use it in case you don’t pay your future liabilities timely.
Don’t Delay to Deal
Whatever the financial difficulty your business is suffering, it’s vital to not delay in dealing with such problems. The longer you leave issues when liquidation seems pending, the more the complications may arise for post liquidation.
Who Can Help Me with the Post-Liquidation Practices in India?
You can contact experts of 3E Accounting who have the best liquidation secretaries in India. You can get perfect India Liquidation Services affordably. The experienced team of experts take care of all your regulatory details and offer one-stop solution services to all the clients.
3E Accounting India
3E Accounting India is a corporate service provider and accounting firm assisting clients with company formation and incorporation. We offer company secretary and business-related services in India.
