How can shareholders put a company into liquidation?

Affected by Covid-19? Immediate Rescue Or Closure Options Available

FAST Free Director Advice & Support, With 100+ offices Nationwide our Licensed Insolvency Practitioners can Help Today.

Updated: 25th January 2021

What is the role of a shareholder during liquidation?

Shareholders may decide to place their company into liquidation for a variety of reasons. Sometimes the business serves no further purpose, and a formal liquidation process means it can be closed down in an orderly manner.

In other circumstances it may be insolvent and unable to pay its creditors, in which case the directors and shareholders can take the decision to voluntarily place their company into liquidation.

This complies with the stringent insolvency laws in place in the UK - these demand that directors place the interests of their creditors first when their business has entered insolvency.

Two forms of shareholder liquidation

There are essentially two main types of company liquidation:

Solvent liquidation means the company can pay all its creditors within 12 months. An insolvent liquidation, on the other hand, involves shareholders agreeing to liquidate their company because there’s no hope of recovery.

Compulsory liquidation is another form of insolvent liquidation, but shareholders have no involvement in putting the company into liquidation. In this case a creditor petitions the court to wind up the company.

So let’s look in more detail at what happens when shareholders place their company into solvent and insolvent liquidation.

Members’ Voluntary Liquidation

Members’ Voluntary Liquidation is typically chosen as a way to close down a business by shareholders/directors wishing to retire, or simply wanting to close in an orderly way when the business has served its purpose and is no longer required.

The process must be administered by a licensed insolvency practitioner (IP), and initially, the directors sign a Declaration of Solvency to state that the business can repay its debts within 12 months.

The company’s directors instigate the process but to put the plan into effect, members need to pass a special resolution at a meeting of shareholders. A licensed IP then takes control of the business and sells its assets to repay any debts. Ultimately the company’s name is struck off the register at Companies House.

Creditors’ Voluntary Liquidation

Creditors’ Voluntary Liquidation offers shareholders and directors the opportunity to put their creditors first when business debts cannot be paid. Directors can be held personally liable for the debts of the business if they increase creditor losses by continuing to trade, so this is an important issue.

If 75% or more of shareholders (by value of shares) vote in favour of putting the company into liquidation, a special resolution is passed and the liquidator takes control of affairs. Creditors are informed of the company’s situation by the liquidator, who goes on to realise any business assets as with a Members’ Voluntary Liquidation.

Shareholders are key figures when placing a company into liquidation

The shareholders must pass a special resolution to place their company into liquidation. They play a fundamental part in commencing the process, as without a 75% vote in favour, an insolvent company cannot enter a CVL.

It’s advisable to seek professional assistance at an early stage if you’re considering a solvent liquidation, but this is crucial if the business is experiencing financial distress and you believe you may be approaching insolvency.

If you would like more information or guidance on how shareholders can place their company into liquidation, please contact one of our partner-led team. Real Business Rescue are liquidation experts and will provide sound, reliable advice. We also offer same-day consultations free-of-charge, and operate an extensive network of offices around the country so you’re never far away from professional advice.

Keith Tully


0800 644 6080
Director Support - Business suffering from Cash-Flow Problems?
If your company is financially distressed, we also offer the below services:
Business debt recovery

  • Recover Unpaid Invoices of £5k+
  • Expert Credit Control Services
  • Stop Late Payers & Bad Debts
Visit Site
Time to pay experts

  • Get Breathing Space with HMRC
  • Support with Business Tax Arrears
  • 35 Years HMRC Negotiation
Visit Site
UK Business Finance

  • Rejected for a CBILS Loan?
  • Get Emergency Business Funding
  • Supporting 1000+ UK Companies
Visit Site
Who we help
  • Company Directors
  • Finance Directors
  • Sole Traders
  • Accountants
  • Small Businesses
  • Large Businesses
  • Partnerships
Contact our team
Jonathan Munnery
Gillian Sayburn
Julie Palmer
or Find your Nearest Office

Here at Real Business Rescue we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. We will not use your information for marketing purposes. See PRIVACY POLICY

Business Rescue Advice for Directors
Free Guide for Limited Company Directors
Business Rescue Advice for Directors
  • How to manage company cash flow problems
  • Advice on dealing with HMRC
  • Understanding rescue and closure options
  • And much more...
Free Guide Download
Dealing with your Insolvent Clients
Business Rescue Guide for Accountants
Dealing with your Insolvent Clients
  • Helping you advise insolvent clients
  • Spotting signs of client distress
  • Exploring business rescue options
  • And much more...
Free Guide Download
Our numbers speak for themselves
Number of UK Offices
Directors Helped
Licensed Insolvency Practitioners

This site uses cookies to monitor site performance and provide a more responsive and personalised experience. You must agree to our use of certain cookies. For more information on how we use and manage cookies please read our PRIVACY POLICY