While operating a profitable business that’s in the black and consistently thriving can be rewarding, a time may come when the company must end. Taking a step away from your business or closing shop may be inevitable, so what’s the optimal route to exit your solvent company?
Weighing up efficient ways to cash out on your investment, such as company liquidation or a business sale is an integral part of exit planning to help generate the best returns for stakeholders.
Tom Procter, a company liquidation specialist at Solvent Liquidation, runs through the exit routes available, including a breakdown of the solvent company liquidation process.
Exit my business - What are the options?
How you exit your business will be determined by a handful of factors, such as business health, timeframe, and your desired end goal. If your business is insolvent and has a slim recovery chance, consider company strike off.
Company strike off, also known as company dissolution, suits businesses with no debts, while a Creditors’ Voluntary Liquidation may better suit companies with outstanding debts.
If your business is solvent, the path you take will largely be determined by whether you wish to draw a line under your business or see business operations continue.
Here are some exit options for solvent limited companies:
Members’ Voluntary Liquidation – A Members’ Voluntary Liquidation is a formal liquidation route for solvent companies. It’s often the most tax-efficient route to closing a company with substantial profits due to the associated tax treatment. An MVL is initiated by a licensed insolvency practitioner and the timeframe is determined by the complexity of the process and the value of profits retained by the business.
If you want to close your solvent limited company tax efficiently, an MVL can achieve this if the qualifying conditions are met.
Business sale – If the business is profitable and has serious growth potential, consider the business sale route to maintain your existing client base and preserve business value.
A business sale can be initiated by a professional business transfer agent who can help find a suitable buyer with the appetite, knowledge, and experience to continue business operations. While this route requires determination and patience, it can generate substantial financial returns and grant a lease of life to the business.
Employee/Management Buy Out – If there’s interest from staff within your organisation to take over the business after your exit, a formal exit plan can help prepare for this in a strategic and timely manner.
An employee/management buyout can secure the future of your business and protect its value upon your exit. As the business will remain in familiar hands, this should minimise disruption to employees, suppliers, and customers. This may also mean more flexibility when negotiating agreement terms.
Merger/Acquisition – If the business has a secure market share, there may be a fierce appetite to merge or acquire. This can often open the door to competitive financial returns and provide certainty about the future of the business.
How to exit a solvent limited company
While there are a range of exit routes available, the path you take will be determined by the circumstances surrounding your exit and shareholder returns.
For professional advice on the optimum time to bring a business to a close and the route most beneficial for stakeholders, speak with your accountant, financial adviser, or licensed insolvency practitioner.
