How-do-I-liquidate-my-company-Process-and-Procedure

Creditors’ Voluntary Liquidation (CVL): A Step-by-Step Guide to Liquidation

  • Directors opt for voluntary liquidation for the company.
  • A licensed insolvency practitioner is selected.
  • Company assets are identified and creditors are addressed.
  • Creditors are paid to the fullest extent possible with the proceeds.
  • The company’s name is removed from Companies House, ceasing its legal existence. The liquidation process concludes.
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A step-by-step guide to liquidating a company

If you’re contemplating placing your insolvent limited company into liquidation, you might be asking, “How do I actually liquidate my company?”

Fortunately, the majority of the liquidation process will be managed by a licensed insolvency practitioner. They will handle dealing with outstanding creditors, selling any business assets, and bringing the company’s affairs to a close.

However, as a director, there are certain steps you’ll need to take to initiate the liquidation process. 

Below is a step-by-step guide to Creditors’ Voluntary Liquidation (CVL), the most prevalent type of company liquidation.

 

Step 1 – Directors choose to liquidate the company

While no one enters into business anticipating failure, it’s an unfortunate reality that some companies encounter financial difficulties beyond rescue. Once you recognise your company’s insolvency—or its impending insolvency—you’re obligated to prioritise the interests of your creditors over those of yourself and fellow directors or shareholders.

This entails refraining from any actions that could worsen your creditors’ position and lead to further losses. Often, this means halting trading immediately, although exceptions may apply. Upon realising your company’s insolvency, it’s crucial to engage a licensed insolvency practitioner to explore liquidation options if rescuing the business isn’t feasible.

 

Step 2 – A licensed insolvency practitioner is assigned

Since you’re opting to liquidate the company, you have the privilege of selecting the liquidator. The chosen liquidator must be a licensed insolvency practitioner.

The insolvency practitioner will arrange a meeting of your creditors, usually conducted virtually. During this meeting, creditors will vote on your nomination of the insolvency practitioner, indicating their approval of your choice. In most instances, creditors agree without objection, and the insolvency practitioner’s appointment is confirmed.

 

Step 3 – Company assets are identified, and creditors are addressed

Once the insolvency practitioner is appointed, the liquidation process can commence in earnest. 

The insolvency practitioner will undertake various duties, including:

1. Pinpointing company assets and selling them, known as liquidating, to satisfy creditors.

2. Investigate any potential instances of director mischief.

3. Conveying with outstanding creditors.

4. Dissolving the company at Companies House.

5. Handling any employee matters, including potential redundancies.

 

Step 4 – Creditors paid as far as possible

Once your company enters liquidation, you no longer need to engage with your creditors directly. Any communication can be directed to the insolvency practitioner, who will manage interactions with creditors on your behalf.

The insolvency practitioner’s responsibility includes ensuring creditors are paid to the best extent possible. This involves liquidating all company assets to generate funds. Once assets are sold, the insolvency practitioner will distribute the proceeds to the company’s outstanding creditors.

Creditors are prioritised based on their ‘ranking’:

1. Secured creditors with a fixed charge (typically a bank).

2. Preferential creditors (including employees).

3. Secondary Preferential creditors (some HMRC debts).

4. Secured creditors with a floating charge.

5. Unsecured creditors (such as trade suppliers).

In CVLs, which entail the liquidation of an insolvent company, there usually isn’t sufficient funds to pay every creditor in full. Any remaining company debt following this process will be discharged unless the director has provided a personal guarantee to secure any borrowing.

 

Step 5 – Completion of the liquidation: The Company’s name is removed from the Companies House register

Once all the company’s outstanding matters are resolved, the final step is to have the company’s name removed from the register held at Companies House. The liquidator will notify Companies House of the request for striking off, which will be executed two months later.

At this stage, the company ceases to exist as a legal entity. Any remaining debts are discharged, and if you haven’t received a disqualification order, you’re free to establish another limited company. However, bear in mind there are restrictions on reusing a company name (or similar name) after liquidation, so it’s important to discuss your future plans with your insolvency practitioner for appropriate guidance.

 

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Are You Thinking of Liquidating your company?

If you’re contemplating liquidation for your limited company, it’s crucial to promptly seek expert advice from a licensed insolvency practitioner. We can assist you in evaluating the situation and determining the best course of action moving forward. With our extensive network of 100 offices across the UK, we provide a partner-led service offering immediate director advice and support. Contact us urgently for assistance.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.