If your company has run out of cash and can't trade on, the responsible thing to do is to put it into Creditors Voluntary Liquidation.
Over our years of working within insolvency, we have been asked many questions by directors looking to close their company for a variety of reasons. When designing this website, we thought that it would be best to summarise those queries that have been raised most frequently. If you have a question that you would like to ask, please contact us. We will be happy to reply to you directly and keep this page updated.
What is a Liquidation ?
It’s a process that turns the company’s assets into cash. That cash is then distributed to creditors and, if there is some left over, to shareholders.
In almost all circumstances it is the end of the road for the company.
Who turns the company’s assets into cash ?
A Liquidation must be conducted by an IP, who will be called the Liquidator.
What’s the difference between a Creditors’ Voluntary Liquidation (CVL) and a Members’ Voluntary Liquidation (MVL) ?
A CVL is an insolvent Liquidation. The company is not able to pay all its debts in full. An MVL is solvent and creditors will all be paid, together with interest.
So what’s a Compulsory Liquidation ?
A Court can make a Winding Up Order if asked to do so and the company will be in Compulsory Liquidation.
Who appoints a Liquidator in a CVL ?
The shareholders initially pass resolutions to wind the company up and to appoint a Liquidator. The Liquidator will inform the creditors and in some circumstances the creditors can decide to either approve the Liquidator’s appointment or propose an alternative IP. If the creditors don’t do anything the shareholders’ Liquidator will stay in their role.
Read our guide to starting a CVL.
What are the Liquidator’s duties ?
As well as selling the company’s assets and collecting its debts, the Liquidator should investigate how the directors have behaved prior to the Liquidation and can bring Court proceedings against anyone who has committed a Liquidation offence. The Liquidator can even investigate the actions of an Administrator or Supervisor in a prior procedure.
Overall, the Liquidator should act in the best interests of all creditors. When there are sufficient funds to pay a dividend then the Liquidator will review, agree or reject creditors’ claims.
The company has a little bit of work left to do. Will the Liquidator trade on to finish it ?
This would be very unusual. We will discuss the benefits and difficulties of the directors completing any work in progress prior to the company going into Liquidation.
How often must the Liquidator keep in touch with creditors ?
Most Liquidators are happy to deal with creditors’ queries throughout the Liquidation, but otherwise a Liquidator must report to creditors annually and when the Liquidation is finished.
Who pays the Liquidator ?
The Liquidator’s expenses and own costs come out of the company’s assets before unsecured creditors get paid. If there are insufficient funds to pay the Liquidator, they won’t get paid unless a third party has agreed to put up the money.
What happens to the company after Liquidation ?
It is “struck off” the register at Companies House. After a while the name is available to be re-used by anyone looking to set up a company.
I've seen "cheap" Liquidations offered by your competitors. Do you offer the same service?
We would be delighted to assist with putting your company into a CVL, but we will always make sure that you do it for the right reasons. Read our Guide to "cheap" liquidations.
Something we’ve not covered yet ? Send us a query via our contact page and we’ll answer you and add it to this section too.