The different types of liquidation

If your company is no longer needed or viable to continue to use, seeking advice from insolvency practitioners to understand what different types of company liquidation are available is the fundamental first step to successfully liquidating your company. Getting the best outcome for yourselves and anyone potentially owed money by the company immediately becomes the priority.

Here at Liquidation.co.uk we have been helping company owners and directors across the UK for four decades to understand the various types of liquidation and deal with the closure of their companies in both solvent and insolvent circumstances.

When your company is faced with insolvency then it can be a difficult time for all involved. Acting quickly can often save unnecessary stress as we take control of your affairs and act on your behalf. Our objective is to protect you, your directors, your shareholders and where possible, your company. It is vitally important you understand the difference between the various types of liquidation.

If you company is solvent (it can pay all the money it owes and its assets are greater than its liabilities) we will work with your accountants to make the process quick and easy for you.

If, for whatever reason, your company is facing liquidation then it can become overwhelming when presented with the different types of liquidation. As liquidation experts with 40 years in business, our team of qualified individuals are on hand to take your call today. We offer a completely free and confidential consultation and in all circumstances we will discuss the available liquidation options which may include the following different types of company liquidation:

Types of liquidation for a solvent liquidation:

Members’ Voluntary Liquidation – if the company has assets (often cash) to distribute to shareholders in a tax efficient way.

Liquidation isn’t only desirable when a company has become insolvent. If you’re looking to close a company that is not in any financial difficulty, then you may have heard of a Members Voluntary Liquidation. A Members Voluntary Liquidation or MVL is used when there are no debt liabilities but the directors and shareholders want to wind up the company.

When to us a Members’ Voluntary Liquidation?

• A company may not be serving a purpose any longer
• The director or owner could want to retire
• A contractor may be planning on becoming a PAYE employee

Either way, because it’s a voluntary liquidation and there’s no debt involved, there’s no need for an enquiry by a licensed insolvency practitioner (also known as a liquidator) as to why the business failed. However, you still need to instruct an insolvency practitioner to carry out this type of liquidation:

• The directors will need to hold a meeting with shareholders and agree the intention to ask for an Members’ Voluntary Liquidation. Because there can be some tax advantages to a process like this, it is often seen as a formality.
• Once the decision is agreed, a Declaration of Solvency needs to be signed. The licensed insolvency practitioner will check that this is a true representation of the company’s finances.
• The final stage of an MVL is the closure of the business and its removal from the register at Companies House.

If you are considering a Members Voluntary Liquidation, the team at liquidation.co.uk will be able to give you the advice you need and take your company through the entire liquidation process from beginning to end. Our team have over 40 years experience working with business owners and contractors from all industries.

The different types of liquidation – insolvent liquidation:

Start Afresh Liquidation – if you wish to close your insolvent company and move your business into a new clean company.

This service is unique to Liquidation.co.uk as we are effectively entering an insolvent company into Creditors’ Voluntary Liquidation (CVL) but are using it as a business rescue process.

Using this type of liquidation process will allow the directors of a company to be able to purchase the goodwill and assets of the company and to go forward and trade within a new company minus the debts of the old company.

What are the benefits of Start Afresh Liquidation as a type of company liquidation?

• Start again with a clean slate
• Buy the assets of the old company to use in the new company
• Turn your business around and make a fresh start

No Asset Liquidation – if your company has nothing left in it but pressure from third parties owed money means liquidation is needed

If you want to liquidate your company but there are no assets remaining, then a No Asset Liquidation would be a cheap and efficient process to enter.

What does the No Asset Liquidation package include?

Our No Asset Liquidation package is designed to be low cost and an easy process for all involved. It is appropriate when the company:

• Has ceased to trade
• Has no assets
• Is insolvent

The following is included in our No Asset Liquidation package:

• Free telephone advice
• Fixed fee quote
• Preparation of all statutory paperwork
• Case Manager assigned to you for the duration of the process
• All meetings held by Zoom call or telephone or at the most convenient location for you 

Creditors’ Voluntary Liquidation (CVL) – the most commonly used type of liquidation in the UK for insolvent companies.

When a company director or shareholder needs to close down a limited company that has become insolvent, a Creditors’ Voluntary Liquidation procedure is likely to be used. The CVL process will ensure the company meets all legal requirements to close.

Don’t forget insolvent means that the company cannot pay those that it owes money to.

If a company is unable to meet its debts (what it owes), the directors and shareholders can agree to move the company into liquidation. The assets from the company are then used to pay any outstanding debts to creditors to the extent that the value of assets allow.

Do you need to use a Creditors’ Voluntary Liquidation?

If you need to close your company because it is insolvent, you will benefit from going through the process of a Creditors’ Voluntary Liquidation. This is a legal process that needs to be handled professionally by licensed insolvency practitioners.

With most limited companies the liability is on the company rather than the directors and shareholders, unless there are, for instance, specific guarantees to pay money owed to certain third parties.

It’s important to understand that this type of liquidation does not prevent, under advice, the rescue of parts of the business that operated within the company

Compulsory Liquidation

What is a Compulsory Liquidation?

A Compulsory Liquidation of a company is a court-led process that should be used as a last resort to wind-up a company. Whether it is the creditor, director or company themselves looking to dissolve the company, they should explore other options before proceeding with the winding-up petition for this type of liquidation.

If the liquidation process is decided upon, then it will be at the court’s discretion when the hearing will be called for a winding-up order to be presented to the company.

This liquidation process is only available to insolvent companies, and is typically started by a creditor who is owed more than £750 from a company and is tired of waiting for their payment.

How Liquidation.co.uk can help you sort out the different types of company liquidation

As industry leading experts with 40 years’ experience; we are in the best position to match any like for like quote ensuring you receive the best service for the lowest price.

Don’t forget that if your business can be saved, whether within your existing company or through a new company, we can explain the process and options for this as well!

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