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What is insolvent liquidation?
Insolvent liquidation is a method used to close a UK limited company that doesn’t have enough cash to pay all those owed money (creditors). The assets of a company are turned to cash and paid to the creditors, usually through a process called Creditors’ Voluntary Liquidation (CVL).
A CVL can be instigated by the directors and shareholders when they agree there’s not enough assets to cover the company liabilities. A liquidator or licensed insolvency practitioner has to take over from here to close your company, sell the assets and pay off creditors as far as possible.
Getting the right advice early on will protect the directors of your company and might even save you money later down the line. Call 0800 054 6580, for free advice on a Creditors’ Voluntary Liquidation (CVL) or request a call back
When to liquidate a company?
As industry experts, we understand that no business wants to declare itself insolvent. This normally happens when a company is unable to pay its bills or has far more liabilities than assets. To see if this applies to you, take our cash-flow and balance-sheet tests.
Liquidation might also be the best option when you find yourself in one of these situations:
A ‘winding up’ petition is being threatened or has been presented against your company.
The outcome of a court case is expected to go against your company and it can’t pay the likely award.
The business of your company is no longer viable.
Your company won’t be able to pay employees’ wages.
The landlord is threatening re-possession of your company’s premises.
Enforcement action is being taken by those owed money by your company.
Your business has had to cease suddenly due to unforeseen circumstances.
How to liquidate a company?
Before the process starts, you need to appoint a licensed insolvency practitioner (if you haven’t already). They’ll become the liquidator.
The most common type of insolvent liquidation is the Creditors’ Voluntary Liquidation (CVL), which your insolvency practitioner will guide you through, disposing of your company’s assets in order to settle its liabilities.
Get shareholders’ approval. A meeting will be called, inviting all shareholders to attend. At least 75% of shareholders (by value of the shares held) must agree to the liquidation, or ‘winding up’. If this happens then a ‘winding up resolution’ is officially approved.
Handle the ‘winding up’ resolution. This must be sent to Companies House within 15 days of it being passed. Your firm will be removed from the Companies House register and will cease to exist.
Send a notice of the insolvent liquidation to The Gazette. Established in 1665, this is the official public record containing, among other things, details of businesses going through the insolvency process.