Q: My limited company may no longer be viable, but as my cousin made a loan to the company I don't want to wind it up unless I have to. What is the best way forward, and the cheapest way to wind up the company if it becomes necessary?
A: If you believe that your company is insolvent, or is likely to become insolvent, you can place it into Administration, either through the courts or out of court. The out of court process tends to be cheaper and can provide more flexibility in respect of timing. If you place the company into Administration, you must appoint an Administrator whose task will be to try and rescue the company, during which time the company will be protected from its creditors. However, as the company borrowed money from your cousin, it is likely he was given a charge over some company assets as security. The company directors must therefore serve written notice on him and any other qualifying charge holders of the proposed appointment of an Administrator. If the company cannot be rescued the Administrator will propose it be wound up.
If you appoint an Administrator you must comply with the provisions of the company's articles of association relating to the decisions of directors or acts of the company, otherwise the Administration appointment will be invalid. You must file a notice of intention to appoint Administrators at the Chancery Division of a High Court District Registry. That District Registry will then have jurisdiction over the entire Administration. Once appointed the Administrator will take control of the company's business and its assets and hopefully your cousin will realise that the appointment is an attempt by the company to keep it going and/or pay back as much of his loan as possible if the company is wound up.