What happens to a company after a liquidator is appointed?

What happens to a company, its directors, and its assets after a liquidator is appointed?

Once a company enters liquidation, whether this is by way of a solvent or insolvent liquidation process, the appointed insolvency practitioner immediately assumes control of the company.

They will then begin their duty of liaising with outstanding creditors, realising company assets, before distributing the proceeds to creditors and/or shareholders. Once the liquidation has completed, the company will be removed from the Companies House register and it will cease to exist as a legal entity. 

In the case of insolvent liquidations, the appointed liquidator is duty bound to investigate the affairs of the company in the time leading up to it becoming insolvent. As a director you may be asked to account for any transactions or situations that may have contributed to the company becoming insolvent should any suspicious activity be highlighted during this process. 

Can I buy back company assets during or after liquidation?

When a company enters liquidation the insolvency practitioner is obliged to generate as much money as possible for creditors from the sale of assets. For this reason, they can take into account a director’s interest in repurchasing the company’s assets during or following liquidation.

In order to purchase company assets during the liquidation process, a fair market value must be paid as this ensures that creditor losses are minimised. A professional valuer will be hired by the liquidator to determine the value of each asset prior to it being put up for sale at auction, or with a view to being purchased by a director.

If company assets are bought back at below a fair market value, it is regarded as an ‘antecedent transaction’ and can be reversed by the liquidator. When purchasing assets of your failed company with personal funds the transaction must be carried out during or after liquidation, and not before the liquidator has been appointed.

If such a transaction has been made beforehand, it will be identified by the liquidator during their investigation into the circumstances of the company’s failure. The transaction will be reversed, and your actions could result in allegations of misconduct.

The role of the liquidator during liquidation

As soon as the liquidator is appointed, control of the company passes from the directors over to the appointed insolvency practitioner.

The liquidator will analyse the company’s assets and liabilities, its existing contracts, and prepare a statement of affairs to present to creditors. This lets creditors know the extent of the company’s financial situation and how it has reached this position.

When the liquidator is appointed, directors are no longer able to use the business’ bank account – in essence, the company’s financial affairs are ‘frozen’ for a time until the liquidator has made their assessment.

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The role of the company’s directors during liquidation

Although directors do not take any further part in controlling the company once the office-holder is appointed, they must assist the liquidator if requested. This typically involves providing information when asked, or financial documentation, and generally supporting the liquidator where necessary.

Once you have appointed a liquidator, creditors should no longer contact you about the affairs of your company. You should direct all contact from them straight onto the appointed insolvency practitioner who will deal with their queries on your behalf.

The role of creditor's during liquidation

The company’s position is presented to creditors via a statement of affairs at a virtual creditors’ meeting. A physical creditors' meetings will be arranged, however, if sufficient numbers of creditors request this. During this meeting, creditors will also be asked to vote on the choice of liquidator.

Creditors will be invited to submit a proof of debt form to ensure they are registered as creditors of the company and therefore in line for a dividend once the final distributions are made following the liquidation of the company's assets. 

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The role of the Gazette during liquidation

The fact that a liquidator has been appointed and the company is being wound up is advertised in the Gazette. The notice includes other details, such as the liquidator’s registered office and date of appointment, and alerts creditors to the company’s situation if they are not already aware.

Following completion of the liquidation, another notice will be advertised in the Gazette informing all interested parties that the company will be struck off the Companies House register. As long as no objections are received, the company will be removed from the Companies House register and a final Gazette notice will be published advertising this fact. 

What happens to company assets during liquidation?

The liquidator will have the company’s assets professionally valued, including intangible assets such as intellectual property, databases, and goodwill. Once a fair value has been established, the assets are sold at auction. The proceeds are gathered in by the liquidator, and used to repay the company’s creditors according to the statutory order of payment in these cases.

How Real Business Rescue can help

Real Business Rescue specialises in helping directors of companies in financial distress, and provides reliable independent advice. If you believe your company may need to be liquidated, we will ensure you understand your duties and obligations as a director, and guide you through the process.

Please contact one of our partner-led team of licensed insolvency practitioners to find out more. We can arrange a same-day consultation free-of-charge, and operate a broad network of offices around the UK.