Company liquidation is a formal process used to close down a limited company. There are two types of liquidation that you can initiate as a director, and a third that is available to creditors seeking repayment of their debt.
This video describes the two principal methods of company closure, and the third method that is commenced by court order.
If the company is solvent, a tax-efficient procedure called Members’ Voluntary Liquidation (MVL) can be followed. This is typically appropriate when a director retires, or the business serves no further purpose and needs to be closed down in an orderly manner.
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Companies in financial difficulty that are unable to repay their creditors need to follow a different process to remain within UK insolvency laws. This procedure is called Creditors’ Voluntary Liquidation (CVL). It places creditor interests first so no unnecessary financial losses are suffered.
Both company liquidation procedures require the appointment of a licensed insolvency practitioner (IP) to realise assets and distribute funds, whether to shareholders via an MVL or to creditors in a CVL.
This video also describes a third form of company liquidation, which is enforced by order of the court. If a creditor has unsuccessfully attempted to recover their money via the standard methods of debt collection, they may be able to petition for a company to be closed down.
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This process is called compulsory liquidation, but unlike CVL, directors have no control over when the company enters liquidation or who is appointed as liquidator. If you would like to learn more about the costs of closing or liquidating a limited company, read our article where we discuss the range of costs across different situations.
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Still unsure whether liquidation is right for your company? Don't worry, the experts at Real Business Rescue are here to help. Our licensed insolvency practitioners will take the time to understand the problems your company is facing before recommending the best course of action going forward based on your own unique circumstances.