The Life of a Company
The two most important times in a company’s life are generally at the very start and end of its existence. It is at these critical times that directors often require guidance and support from a range of advisers. Accountants, Business Recovery specialists, Tax Advisers and most importantly Solicitors are needed.
The correct company structure should be one of the first issues addressed with Solicitors and other advisers. It is essential that the company structure allows for the right amount of flexibility whilst providing sufficient protection for those forming the company. Tollers have advised numerous organisations on the correct company structure and are happy to work in conjunction with advisers to achieve this.
Once the company structure has been decided, it is key that the documentation formalising the structure of the company, such as a shareholder agreement, is clearly drafted to minimise the risk of disputes occurring at a later stage. Failure to have detailed documentation governing the company could present a serious risk to its success.
It is also vital at the start of a company’s life that a comprehensive set of terms and conditions are in place to govern the company’s relationship with its customers. Tollers have assisted a number of company’s in Milton Keynes with the drafting of clear and concise terms and conditions, always taking an active approach in ensuring the client’s business is fully protected.
The end of a company’s life may come about in a variety of ways. Many companies are acquired by other companies who wish to increase their market share or expand into new areas of business. Where companies have struggled financially, often due to a customer going out of business, there are options to sell parts of the company through an insolvency process, to restructure the company or negotiate preferable payment terms with creditors to enable the company to continue trading.
Alternatively, a company may be forced into a formal insolvency procedure as a result of a dispute. Failure to pay creditors is the most common cause, however director and shareholder disputes are becoming increasingly prevalent in these straightened times. An attempt to wind up the company can be the last resort by parties to a dispute. However early advice, support and intervention can result in a better outcome for the parties involved.
Tollers have recently settled two large shareholder disputes which would have resulted in the companies being placed into administration or compulsory liquidation if the dispute had not been resolved. In both cases a creative approach to settlement has resulted in the businesses being able to continue to trade.
A company’s life may not come to an end as a result of financial issues. It may be due to a director wishing to retire or the need to use tax efficient methods to extract company funds. Solvent liquidations are becoming more popular. Those wishing to close down a company and ensure that outstanding liabilities are dealt with often opt for a liquidation, either solvent or insolvent, which has the benefit of creating a clean break for directors and shareholders alike.