How to liquidate your restaurant in Scotland
Scotland’s restaurant industry fosters economic growth and employs a large number of people, bringing local communities together and encouraging tourism in both rural and urban locations.
The sector, however, is facing major difficulties that threaten to make trading circumstances untenable for many business entities, cafes included. Insolvency remains a concern to Scotland’s restaurants, ranging from rising food and energy costs to personnel shortages.
Despite recuperating to some extent from the forced closures of lockdown, several firms, including many in Edinburgh, are still unable to make ends meet. So, what does insolvency and liquidation mean for the Scottish business sector?
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Liquidation of bankrupt restaurants?
How to liquidate a Scottish Restaurant
Liquidation of bankrupt restaurants
Creditors’ Voluntary Liquidation (CVL) is a statutory procedure that guarantees firms close in accordance with insolvency laws, ensuring all processes are fully registered. Failure to do so can expose corporate directors to claims of malfeasance.
A licenced insolvency practitioner (IP) is appointed to oversee the proceedings and sell the company’s assets in a liquidation auction, including any remaining leases. The revenues earned are subsequently used to benefit the debtors, ensuring that assets, including any premises or leases, are handled by a licenced IP. CVL reduces the risk of improper trading claims while also allowing directors to receive statutory redundancy pay and potentially sell your business under licenced procedures.
Liquidation of solvent restaurants
Another type of liquidation, known as Members’ Voluntary Liquidation (MVL), may be appropriate for closing solvent pubs and restaurants if the owner wishes to transition into a different business or is nearing retirement.
MVL may be a viable alternative if the company has earnings of £25,000 or greater to distribute, as funds taken are liable to Capital Gains Tax (CGT). This option should be considered if you are planning to sell your business. The operation is carried out by a licenced IP, who winds down the business’s affairs and shuts it by removing the company name from the official registry. This is a crucial step whether you plan to sell your business or cease operations entirely.
What types of issues affect Scottish Restaurants
Increasing operational costs.
The rising cost of commodities like food and energy has made it difficult for many firms in the sector, pushing them to raise prices at a time when people are prioritising necessary things owing to the elevated cost of living.
Staff shortages.
Staff shortages continue to hamper expansion as well as profitability in the bars and restaurants sector, forcing businesses to cut back on opening hours or lower their food and drink offerings.
What if you think your restaurant is facing financial difficulty but is solvent?
Company Voluntary Arrangements (CVA)
Company Voluntary Arrangements (CVAs) officially restructure a company’s debts under a legally binding arrangement with creditors and can be a confidential way to save your Scottish business.
Company administration
Entering company administration affords time to assess the business’s future without the possibility of a creditor terminating the bar, restaurant, or cafe lease.
McLaren Insolvency Practitioners specialise in supporting company directors in the bar and restaurant industry successfully shut down their businesses. We understand the difficulties and provide impartial sector expertise.
McLaren Insolvency Practitioners
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If your company is dealing with debt, call us immediately for experienced guidance and personalised solutions to overcome financial obstacles. Our team of licenced insolvency practitioners is available to assist you with your company’s position.
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