Should I liquidate my company?

Read this page if you are wondering if liquidation is the right option for your company. It may be that trade is poor, product/service demand has dropped and/or your company is facing financial difficulty. Alternatively, you may just wish for a change in your career path – these are all valid reasons for you to consider liquidation.

The liquidation options available are based on the financial state of your company:

If the company is solvent… Members Voluntary Liquidation.

If the company has debts and is seeming unable to settle these… Creditors Voluntary Liquidation.

The above are options which the directors start. When the company is unable to pay debts and creditors are frustrated with having to chase what they are owed, then they can start the process by issuing a petition to the Court to have the company compulsorily wound up.

Fees involved

Be aware that there are fees to be paid for liquidations. Sometimes they are covered by sale of company assets, other times you may need to use personal finances.  In general the costs of voluntary liquidation range from £4000-£6000.

What is the liquidation process?

MVL or CVL, both processes require expertise and guidance of a licensed insolvency practitioner (IP). It is simply not possible for you to liquidate your limited company without one. Therefore, the first step is seeking help.

Once appointed, it is the role of the insolvency practitioner to “liquidate” the assets of the company and so turn them into cash to pay the stakeholders such as shareholders/members and creditors.

All assets are valued and then the insolvency practitioner arranges the selling of these, in return for capital that is used to pay off the creditors owed. Note that creditors will be paid in priority order, and the IP will be sure to settle their own cost too. Those lower down in the order of priority may be left out of pocket as a result, depending on the difference between the amounts realised and that owed. Remember, as the company is limited, any debts after realisation are wiped, unless any personal guarantees are involved and then responsibilities may in some way alter.

Following liquidation, the company is removed from Companies House’ register of companies and is ceases existence. The company directors are not held liable and not penalised, unless the insolvency practitioner comes across any acts of non-compliance in position as director, whilst handling the liquidation. If all actions were correct, the director(s) are free to set up another company but note there are some rules to follow if setting up in the same or a similar industry, so take advice from an insolvency practitioner on ‘phoenix companies’, for ultimate protection.