Liquidation is the legal process of ‘winding up’ a limited company. After liquidation, the company will cease to trade and is removed from the register at Companies House (known as being ‘struck off’).
Both insolvent and solvent companies can be liquidated. For an insolvent company, this can be done via a creditors’ voluntary liquidation or a compulsory liquidation. For a solvent company, it can be achieved via a members’ voluntary liquidation.
Creditors’ voluntary liquidation
A director can decide that a company should be liquidated if:
- they can demonstrate that the company is insolvent; and
- at least 75 per cent of shareholders (by value) agree and pass a ‘winding up’ resolution.
If the resolution is passed, you must then:
- appoint an authorised insolvency practitioner, such as Benedict Mackenzie, to act as liquidator
- send a copy of the resolution to Companies House within 15 days of it being passed
- advertise the resolution in The Gazette within 14 days of it being passed.
This process allows creditors to establish their claims against the company and to be paid out of the assets if possible, in an orderly way. Benedict Mackenzie will help you through the process of putting your company into liquidation. We will realise any assets and distribute any surplus funds to the creditors. We will wind up all contracts and legal issues and ensure your company is taken off the register at Companies House.
The Court may make an order for the compulsory liquidation of a company if a creditor who is owed over £750 petitions the Court for such an order.
Members’ voluntary liquidation
If shareholders choose to wind up a company when it is solvent and has enough money to pay all debts within one year, you can place the company into members' voluntary liquidation. An MVL is mainly used for three purposes:
- Shareholders unlocking their capital and retiring.
- Closing down unwanted subsidiaries.
- A corporate reconstruction, where shareholders wish to separate component parts of a business.
Role of the liquidator
As soon as we are appointed as liquidator, we will take control of your business. We will:
- manage the whole process
- sell any assets and use the money to pay creditors
- pay the liquidation costs
- keep creditors and the authorities informed of progress
- remove the company from the Companies House register.
Advantages of liquidation
- Prevents further legal action by your creditors
- Employees can claim unpaid salary and redundancy pay from the government
- You can mitigate potential personal liabilities
The sooner you take professional advice, the sooner your problems can be solved. We offer a free, no-obligation consultancy session – to claim yours call 01293 447799.