How to Wind Up a Limited Company

How to wind up a limited company

A limited company can be wound up in one of two main ways; either via a formal liquidation procedure or by using the strike off process.

Furthermore, a company can either be wound up voluntarily by the company's directors and/or shareholders, or it can be forced into liquidation by order of the courts following a creditors' winding up petition. 

Understanding how to wind up a company and what the process actually entails can be quite confusing as the procedure for winding up a company is different for a solvent business than it would be for an insolvent one. Likewise, a voluntary winding up process is different to a compulsory one which is forced upon a company by the courts.

So let's take a look at the winding up process in more detail based on the above factors.

Is winding up a company the same as company liquidation?

Liquidation and winding up are terms which are often used interchangeably. Winding up a company involves bringing the affairs of a company to an end by ceasing all trading activities and notifying any interested parties that the company is to be closed. Liquidation is part of the winding up process where company assets are sold for the benefit of outstanding creditors.

A company can be wound up, however, without having to go into liquidation. This is only possible if the company has no assets to liquidate. 

Can I wind up my own company?

If you are the director of a limited company, you can begin winding up proceedings against your company if you no longer wish to continue running the business. Bear in mind that if you are one of multiple directors, you will need the consent of the majority of directors before you can initiate the winding up of the company. 

For companies in the UK looking to wind up their company, there are two main types of voluntary liquidation and it is imperative to understand which applies to your situation. If your company is solvent you would utilise what is known as a Members’ Voluntary Liquidation (MVL), but if you cannot hope to pay your debtors the procedure would be called a Creditors’ Voluntary Liquidation (CVL).

If your company has no assets and no liabilities, then you can wind up your company using the strike off process rather than opt for liquidation.

Can creditors wind up my company?

It is possible for creditors to commence winding up proceedings against your limited company if you fail to pay them what you owe. This is done through the issuing of a Winding Up Petition. 

Starting winding up proceedings is an extremely serious - not to mention costly - action for a creditor to take. In the majority of cases, the issuing of a winding up petition is only done once creditors have exhausted all other options when it comes to recovering the money they are owed. 

If you fail to respond to the winding up petition, the courts will issue a winding up order against your company which will see the company forced into compulsory liquidation. If you have been presented with a winding up petition, and you wish to save your company from liquidation, you need to act fast. Contact a licensed insolvency practitioner as a matter of urgency to help you understand the options you have.

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Shaun Barton
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What is the process of winding up a limited company?

The process of winding up a company differs depending on whether you are voluntary winding up your company or whether this is something which is being forced upon you by the courts. 

For a compulsory liquidation, a creditor will serve you with a winding up petition. If you fail to take action, the courts will issue a winding up order and the Official Receiver will be appointed to begin the process of winding up your company. 

For a voluntary liquidation, you are in control of choosing the insolvency practitioner who will conduct the winding up of your company. Following agreement by a majority of the company's shareholders, the insolvency practitioner will be appointed and a creditors' meeting will be called. If no objections to your choice of insolvency practitioner are raised, then the winding up process will begin in earnest.

If you are winding up your company using the strike off process, this is done by submitting a DS01 form to Companies House and sending a copy to all interested parties which include any creditors. Your strike off application will be advertised in the Gazette, and so long as no objections are received, the company will be struck off the register following a period of two months and the company will no longer exist.

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How Real Business Rescue can help

If you are considering winding up your company, seeking advice from a licensed insolvency practitioner can help ensure you choose the most appropriate method of doing so based on your company and its own unique circumstances. 

Call the team on 0800 644 6080 to arrange a free consultation with a licensed insolvency practitioner today.