A group may have a subsidiary whose business is not performing to the standard of the rest of the group or is just no longer relevant to the group’s strategy. This may be the only UK branch of an overseas group.

Closing the business could have the following advantages;

1. Release capital which can be reinvested in better performing parts of the group or returned to investors;
2. Free up senior management time; and
3. Avoid possible claims against the directors for wrongful trading if they allow the company to continue to trade and it eventually goes into insolvent liquidation.

Often the management are not aware of what the costs of closure would be and they are worried that the parent may be liable for any shortfall.  Moorfields can advise on what the likely closure costs would be eg estimate the amounts that employees would be entitled to on redundancy (these amounts are often much lower than expected by European clients), and provide comfort that, in the absence of any cross guarantees, the parent will not be called upon to meet any liabilities of a subsidiary.  This would enable management to make an informed decision when considering their options.

If a decision is made to close down a business the directors could immediately place the company into MVL and appoint us to be liquidators; we would then be responsible for the entire wind down.  This would have the advantage for the client of freeing up senior management time; however costs could be saved by management tidying up the company as much as possible before placing it into liquidation.

Often where a UK branch of an overseas group is closed there will be a long tail of matters to be dealt with, for example debts to collect and tax computations to be agreed with HMRC.  The advantage of an MVL is that these matters can be dealt with by the liquidator. For example we recently acted as liquidator to the UK subsidiary of a Japanese group and were able to recover a debt through the UK courts from the company’s former landlord which would have been time consuming and costly for the group management in Tokyo to have done.

Once the company is placed into MVL the compliance costs of the entity are minimised - there is no longer a need for annual accounts to be prepared and audited.

If we are engaged from the early planning stage we can project manage the whole exit process, ultimately acting as liquidator in the winding up and ensuing that the company is dissolved.  As specialists in corporate recovery work we are experienced in the disposal of leasehold and freehold properties, dealing with the redundancy of employees and ensuring that all regulatory matters are dealt with, therefore we can assist overseas management, who may not be familiar with UK requirements, on the closure of their UK business.