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Knowledge centre

Answers to all the questions you have around general liquidation, insolvent liquidation and solvent liquidation, as well as handy downloadable guides designed to give you peace of mind.

Knowledge centre

FAQs

What are my liquidation options?

Your solvent liquidation options are:
Members’ Voluntary Liquidation (MVL)
Your insolvent liquidation options are:
Start Afresh Liquidation
No Asset Liquidation
Creditors’ Voluntary Liquidation (CVL)
Compulsory Liquidation
To discuss the best option for your business, contact us

What is the difference between insolvent and solvent liquidation?

A company is solvent when it has enough assets to meet any debt obligations in the long-term. You may have a temporary problem with the amount of cash you have available at any one time to pay a due bill, but your overall solvency is good. Insolvency means that the company doesn’t have enough assets to cover their debts, either in the short or long term. You can take the cash-flow and balance sheet tests How do I know if I’m insolvent? to see if you are solvent or insolvent. If you’re still unsure, contact us to talk about your situation.

Is company liquidation right for me?

These are the main reasons why you would liquidate a company:

  • Your business has been sold to another company
  • The directors and shareholders of your business are retiring
  • You’re a contractor that operated within a company and are now taking a full-time job
  • Your business has experienced difficulties that have led to it being unable to pay creditors
  • Your business that operates within a company is no longer able to continue, either at all or within that particular company
If you’re still unsure, contact us to talk about your situation.

Can I liquidate my company and start again?

Liquidation and a re-start are absolutely achievable using a Creditors’ Voluntary Liquidation. It can be done smoothly, quickly and, most importantly, within the law. When a company is placed into liquidation its contracts and relationships come to an end. This doesn’t have to mean that the business that runs within the shell of the company can’t be uplifted and placed into a new company, taking the good bits forwards and starting afresh. Worthwhile contracts can be negotiated over to the new company. We use our Start Afresh Liquidation service in these situations. Find out more about it here

What is voluntary liquidation?

A voluntary liquidation may be required if your company is either insolvent or solvent. If your company is solvent but has come to the end of its trading life, a solvent liquidation provides a tax efficient way to close the company. If your company is insolvent and has no choice but to cease trading, an insolvent liquidation will formally close the company while dealing with its creditors. To discuss the best option for your business, contact us .

What or who is a liquidator?

A liquidator is a qualified person who is appointed to formally ‘wind up’ the affairs of a company. A liquidator must be a licensed insolvency practitioner, licensed to act by a professional regulatory body. Only a licensed Practitioner may act as liquidator of a company, either solvent or insolvent.

What does a liquidator do?

Insolvent liquidation: The liquidator will prepare and file all of the official forms, communicate with the company’s creditors and will make employees redundant if necessary. They will organise for the sale of assets (if there are any) and distribute the proceeds to the creditors.
Solvent liquidation: The liquidator will prepare and file all of the official forms and work to distribute shareholders’ funds as quickly as possible.

What is liquidation?

Liquidation is the legal process by which a company stops trading and ceases to exist. Once liquidation has been completed, the business will be removed from the register at Companies House. Employees are made redundant and any assets are used to pay off outstanding company debts and fees. This can happen for a variety of reasons, including when the business has become insolvent and is unable to pay its debts or when the members decide to close a solvent company because the owner is retiring or company no longer has a purpose. To discuss the best option for your business, contact us .

How do I liquidate a company?

There are two main ways to liquidate a company: a Members’ Voluntary Liquidation (MVL) for a solvent company, and a Creditors’ Voluntary Liquidation (CVL) for an insolvent company.
We also offer these services:
Start Afresh Liquidation
No Asset Liquidation
Compulsory Liquidation
To discuss the best option for your business, contact us

What are a director’s responsibilities in a liquidation?

As a director, it’s crucial that you follow the correct legal process when liquidating your company. This is:

  • Once you agree the company is insolvent – in other words, it cannot meet its debts – it’s the directors’ responsibility to ensure it ceases trading immediately. This reduces the damage to the company but also protects you as a director.
  • You should not take on any more debt and you should try to secure assets which can be sold by the liquidator. If you continue to trade, knowing that your business is in trouble, you will have to face an investigation by the Insolvency Service and could be prosecuted.
  • As a director, you need to call a shareholders’ meeting and reach an agreement about ‘winding up’ the company. A licensed insolvency practitioner ‘What or who is a liquidator?’ will then be brought in to handle the sale of assets and manage the liquidation.
  • You also have an obligation to provide all information to the liquidator in a timely fashion, including financial records and other paperwork for the business. This is something we’ll be able to advise on once the process has begun.
contact us about how to begin your liquidation.

What happens after liquidation?

Immediately following a liquidation, assets from the company are sold and used to pay off creditors. The company is removed from the register at Companies House and ceases to exist. The purpose of liquidation is to close a company without any liability being placed on the directors. If the right process has been followed and there is no suggestion of wrongful trading, that means you’re free to move on – perhaps open another company or move to a new career. There are certain caveats that may affect any directors involved in a company liquidation. For example, there may be personal guarantees in place that still need to be satisfied and honoured. The same could be true of if the directors have money owing to the company. Everyone’s situation is different. contact us to discuss the best solutions for your business.

Liquidation rules and regulations

The rules and regulations for liquidation vary depending on the type of process you’re going through. The main pieces of legislation relating to insolvency and liquidation are:
Companies Act 2006
Insolvency Act 1986
The Insolvency (England and Wales) Rules 2016.
Your licensed insolvency practitioner will discuss these with you. contact us about your liquidation.

How do I close a company?

There are many reasons for closing a company. Whatever yours is, the liquidation has to be done properly and legally. Failure to do so can result in a fine or possible prosecution.
If you’ve decided to close your business, you have a choice of processes. However, not every option will be available or applicable to your situation.
With liquidation.co.uk your options are:
Solvent liquidation;
Members’ Voluntary Liquidation (MVL)
Insolvent liquidation;
Start Afresh Liquidation
No Asset Liquidation
Creditors’ Voluntary Liquidation (CVL)
Compulsory Liquidation
To discuss the best option for your business, contact us .

Why would I need to ‘wind up’ my company?

These are the most common reasons for ‘winding up’ a company:

  • If the business within a company is no longer able to continue
  • The business has been sold to another company
  • The directors and shareholders of a business are retiring
  • A contractor that supplied services through a company is taking a full-time job
  • The business has difficulties and it cannot pay the money it owes to creditors
‘Winding up’ is not always the only choice for a limited company closure. contact us to talk about the best option for your business

When is the best time to liquidate a company?

For a solvent company

  • Which tax year does a personal capital gain fall into?
  • Is a budget review due that may affect tax rules for the future? What other personal capital gains fall within the relevant tax year? Is there a time restriction on the application of Entrepreneurs’ Relief (a personal tax relief)?
  • Are you starting a new full-time role and won’t need your company? Has your business just been sold?
  • Are you considering retiring from your business?

For an insolvent company

  • A ‘winding up’ petition is being threatened or has been presented against the company
  • The outcome of a court case is expected to go against a company, and it can’t pay the likely award
  • The business of the company is no longer workable
  • A company will not be able to pay the wages for its staff
  • A landlord is going to act against the company
  • Action is being taken by those owed money by the company to recover money
  • A business has had to cease suddenly due to unexpected circumstances
Every situation is different. contact us and we’ll take the time to understand your business and find the best solution for you.

How long does it take to liquidate a company?

We can help to take the pressure off by dealing with creditors very quickly but it will take a few weeks to be legally in liquidation. After we’ve been legally appointed there are a number of statutory duties that have to be completed. The complexity of each company situation will affect how long it takes to complete the process. A ‘fast’ liquidation will take 3 to 6 months but a ‘very complicated’ one will take over a year.

Who can act as a liquidator?

The role of a liquidator for voluntary liquidations is restricted to licensed insolvency practitioners, like liquidation.co.uk. During a Compulsory Liquidation an official receiver will be appointed as company liquidator. To discuss the best option for your business, contact us .

Who pays for a company liquidation?

Creditors’ Voluntary Liquidation (CVL): the company usually pays but if it cannot afford to then the directors and shareholders will need to contribute to cover the costs.

Compulsory Liquidation: the side forcing the liquidation pays a deposit to cover the fees. If there are no assets then they get nothing back. The Insolvency Service that does the liquidation is funded by the Government, which will cover any outstanding costs.

Members’ Voluntary Liquidation (MVL): the company assets cover the costs.

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