Updated: 29th January 2020
When your business is no longer profitable and there seems to be no prospect of escaping insolvency, a straightforward way to end the company is to liquidate all assets. Beginning the liquidation process is very easy, but there are certain steps that need to be taken to protect the company's directors. There are two types of liquidation that apply to insolvent companies – Compulsory (in which one of the company’s creditors forces the business into liquidation by way of a winding up order) and Creditors' Voluntary (in which the company directors voluntarily start the liquidation). The easiest way to liquidate your own company is to undergo a Creditors’ Voluntary Liquidation.
The first step in starting a CVL is approaching an insolvency practitioner to facilitate the process. If the company is already trading insolvent the Insolvency practitioner will have to hold a creditors’ meeting, during which a liquidator will be appointed. In most cases the creditors will appoint the liquidator recommended by the company's directors (i.e. – the insolvency practitioner). However, if a bank is one of the company’s major creditors they may choose to appoint a liquidator from their own approved panel. Once you’ve made the decision to liquidate your business and the creditors' meeting has been held, the rest will be handled by the appointed liquidators and no further input will be needed from the company's directors. The liquidator will sell the company’s assets (if there are any) and will use whatever proceeds remain to repay creditors.
Initiating a Creditors’ Voluntary Liquidation typically costs several thousand pounds, so why not just wait until one of your creditors issues a winding up petition and forces the company into a Compulsory Liquidation instead? This is an option which many directors choose but it is highly likely that the whole process will take longer and be a far more stressful experience.
I am Keith Tully and I am the Partner of Real Business Rescue, I have seen every possible company scenario and am happy to help you where I can.
Initiating the liquidation voluntarily instead of waiting on your creditors will give you the peace of mind of knowing that everything is being taken care of.
Unless you feel that your insolvent company has no hope of becoming solvent again, or the company has so few assets that continuing would not be worthwhile, there are two other options you might want to consider before committing to liquidation:
Call us today to participate in a free consultation and we’ll help you determine whether liquidation is the most ideal course of action for your company. If you’ve already made your decision we can simplify and expedite any insolvency procedure you have in mind. We have an extensive network of 78 offices offering confidential director support across the UK.