Company Liquidation Process
Before you make a decision about which process is right for your Company you must determine whether your Company is solvent or insolvent.
There are two tests that are a good indicator of a Company being insolvent:
- Balance Sheet Test – If the Company liabilities are greater than the value of Company assets
- Cash Flow Test – If the Company is struggling to make payments as and when they fall due
Liquidating an Insolvent Company Via A Creditors’ Voluntary Liquidation (CVL)
What is a CVL?
A formal process used to wind up a Company that has reached a position of Insolvency. A CVL is a director led process which sees the directors taking control of their insolvent Company by placing it into CVL.
The purpose of a CVL is for the appointed Liquidator to sell any remaining Company assets and, where possible, distribute the proceeds of the sale to Company creditors.
The process can also be used as a means to allow the directors the opportunity to purchase the assets and goodwill of the business with a view to starting a new Company.
Who can use a CVL?
Any Insolvent Company is eligible for this process.
Key advantages of a CVL
- A Director led process meaning that you will have the ability to choose the Insolvency Practitioner that you would like to be appointed as Liquidator. In a Compulsory Liquidation the Official Receiver is appointed by the creditors or the court
- The appointed Liquidator will have a duty to achieve the best results for Company creditors and will be able to guide you on how best to do this
- The appointed Liquidator will have to act in accordance with the rules set out by the Insolvency Act and Rules 1986
- Further legal action against the Company is unlikely once notice has been given that the Company will enter CVL as it will be a waste of money for the creditor
- Company employees will be able to claim unpaid wages, notice pay, holiday pay and redundancy pay from the government
- You will be given the opportunity to purchase the Company assets and/or goodwill for use in a new Company
- At the end of the process Companies House will start the process of removing the Company from the register
- The appointed Liquidator will deal with all Company communication on your behalf which removes creditor pressure
Step 1: Take advice on all of the options available to you. We offer a free initial meeting or free telephone advice
Step 2: Instruct your chosen Insolvency Practitioner to commence the CVL process. At this point, the Insolvency Practitioner will become the point of contact for your creditors and will deal with all Company communication going forward
Step 3: Hold a meeting of Directors to resolve to place the company into Liquidation
Step 4: Arrange a meeting of Shareholders and a meeting of Creditors
Step 5: Give notice to Shareholders and Creditors of the meetings
Step 6: The proposed Liquidator will assist in the preparation of statutory paperwork including a Statement of the Company’s affairs
Step 7: Attending the meeting of Shareholders and the meeting of Creditors. A vote will be held and will determine whether the Company be formally placed into Creditors’ Voluntary Liquidation
Step 8: The appointed Liquidator of the Company will notify Companies House that the Company is now in Creditors’ Voluntary Liquidation
Step 9: Once appointed by the members and creditors the Liquidator has three main duties:
- To realise the Company’s assets
- To agree the claims of the Company’s creditors
- To investigate the company’s affairs and the director’s conduct
How can we help?
At Liquidation.co.uk we have helped thousands of Companies wind up their affairs using the CVL process. We offer a professional service at a very competitive price and we are able to meet at a time and location that is convenient to you.
Liquidating a Solvent Company Via A Members’ Voluntary Liquidation (MVL)
What is an MVL?
An MVL is used when the Shareholders wish to close down a Solvent Company. This process is often used in scenarios such as Directors wishing to retire or the Company, simply, no longer having a purpose.
Who can use an MVL?
Any Solvent Company is eligible for this process
Why use an MVL? – Key advantages of an MVL
- Tax Benefits – Since the introduction of the Extra-Statutory Concessions Order 2012 any distribution made to Shareholders in the closure of a solvent company which is greater than £25,000 will be treated as income for tax purposes UNLESS and MVL is used. If an MVL is used then these distributions will be treated a capital receipts and will receive a lower rate of tax.
- An MVL should also be eligible for the use of Entrepreneurs’ Relief which is a personal tax relief and can bring the tax rate applied to Shareholder distributions down to as low as 10%
- An MVL can be used as part of a Solvent restructuring through a S.110 agreement
- In a Solvent Liquidation, the directors conduct will not be investigated
Step 1: Take advice on all of the options available to you. We offer a free initial meeting or free telephone advice. You will also need to take advice from your tax advisor
Step 2: Instruct your chosen Insolvency Practitioner to commence the MVL process
Step 3: All outstanding H M Revenue & Customs returns to be filed
Step 3: Hold a Board meeting
Step 4: Prepare a Declaration of Solvency
Step 5: Provide notice to Shareholders of the General Meeting
Step 6: Hold the General Meeting at which the Shareholders resolve to place the Company into Liquidation and formally appoint the Liquidator
Step 7: Notification of the appointment of Liquidators will be given to Companies House and advertised in the London gazette
Step 8: We will request that the funds in the Company bank account be transferred to a designated case account
Step 7: The cash will be distributed to Company Shareholders upon receipt of the funds from the bank
Step 8: We will request confirmation from H M Revenue & Customs that there are no outstanding issues
Step 9: We will request that Companies House begin the process to remove the Company from the register
How can we help?
At Liquidation.co.uk we have helped thousands of Solvent Companies wind up their affairs using the MVL process. We offer a professional service at a very competitive price and we are able to meet at a time and location that is convenient to you.