What happens to a company after a liquidator is appointed?

Company liquidation timeline once a liquidator is appointed

A liquidator will be chosen to manage the company and start the process of liquidation. The liquidator, who can be either an Official Receiver (OR) or insolvency practitioner, will gather funds to pay back creditors and shut down the company, resulting in its removal from the Companies House register.

 

What should be the next steps after appointing a liquidator?

When a company first becomes insolvent, it should halt its trading activities. If there’s no chance of recovery, it will proceed into liquidation. Once a liquidator is chosen, the formal procedure begins, ultimately leading to the closure of the company.

It’s crucial to understand that the liquidator represents the creditors, not the company or its directors. One of their primary tasks is to sell off company assets and then share the proceeds among the creditors.

The company is distinct from its directors. The directors may be required to explain any transactions or circumstances that have endangered the company in the period before insolvency.

So, what exactly does the liquidation process once the liquidator assumes responsibility? What becomes of the company?

 

Creditors are informed of the company’s situation

Previously, creditors’ meetings were conducted in person to update them on the situation. However, this aspect of the liquidation process was altered in 2017 with the introduction of new insolvency regulations.

The company’s status is communicated to creditors through an electronic statement of affairs, replacing the need for in-person creditors’ meetings. 

However, meetings can still be arranged if a significant number of creditors request it.

 

The company is controlled by the liquidator

Once the liquidator is selected, they assume control of the company from the directors. Only the Official Receiver (OR) or a licensed insolvency practitioner (IP) can serve as a liquidator and conduct formal insolvency proceedings like this.

The liquidator will assess the company’s assets, debts, and ongoing contracts. They’ll then compile a statement of affairs to share with creditors. This document outlines the company’s financial status and explains how it reached this point.

When the liquidator takes charge, directors lose access to the business bank account. Essentially, the company’s financial activities are halted temporarily until the liquidator completes their evaluation.

 

The company’s directors

After the office-holder is appointed, directors no longer have a role in managing the company, but they must cooperate with the liquidator if needed. This usually means supplying requested information or financial documents and offering support as required.

 

Company assets are realised

The liquidator will arrange for a professional valuation of the company’s assets, including intangible assets like intellectual property, databases, and goodwill. After determining a fair value, the assets are sold at auction.

The liquidator collects the proceeds and allocates them to repay the company’s creditors following the statutory order of payment in such cases.

 

The company’s winding-up is announced in the Gazette

The appointment of a liquidator and the winding-up of the company are publicised in the local Gazette, which could be based in London, Edinburgh, or Belfast. The notice contains additional information, such as the liquidator’s registered office and appointment date, informing creditors of the company’s status if they’re unaware.

 

Bad publicity

The public notice of the business’ liquidation in the Gazette can lead to negative publicity for the company and reputational harm for the directors. Whether this is justified or not, insolvencies can occur rapidly and are frequently beyond the directors’ influence.

 

 

Read More:  

• What happens to your pension if your employer goes into liquidation
• What is a Director’s Conduct Report during liquidation
• What is the order of company creditors in liquidation
• What if I can’t afford to liquidate my limited company
• What is a company secretary and what is their role in liquidation

 

Removal from the Register of Companies

After repaying creditors as much as possible, the company is removed from the register at Companies House. It cannot be reinstated, but depending on the liquidator’s findings regarding director conduct, directors may still be eligible to hold office in future companies.

At Vanguard Insolvency, we specialise in assisting directors of financially troubled companies, offering trustworthy independent advice. 

If you suspect your company may require liquidation, we’ll ensure you grasp your duties and responsibilities as a director and support you throughout the process.

Get in touch with one of our partner-led teams of licensed insolvency practitioners for further information. We can schedule a complimentary same-day consultation and have a wide network of offices across the UK.