Member of BTG Global Advisory

If your company is going into liquidation, the process will involve realising all business assets and holdings in order to repay creditors. There are two types of liquidation – voluntary and compulsory, and we look at both in more detail below.

Voluntary Liquidation

You might have opted for voluntary liquidation in a range of circumstances. Maybe creditor pressure has become too much to deal with, or you are trying to avoid accusations of wrongful trading? You may simply want to retire, and the company is actually trading in a solvent position.

Whatever the reason, closure of your business will be imminent, the process being administered by a licensed Insolvency Practitioner.

Begbies Traynor is available for appointment as liquidator. Our people have many years’ experience of guiding companies through this process, and can ensure your compliance with all legislation.

Two voluntary liquidation options are available – Creditors’ Voluntary Liquidation (CVL) and Members’ Voluntary Liquidation (MVL).

Creditors’ Voluntary Liquidation

A good option when:

  • Your creditors are relentless in their efforts to recoup monies owed, and you want to prevent the compulsory winding-up of your company
  • You want to limit your personal liability for business debts
  • Your company has no chance of recovery, and is deemed not to be viable in the long-term
  • You want to minimise the risks of wrongful trading accusations.

A short breakdown of the process:

  • A meeting of shareholders is held, in which 75% (by share value) must agree to a CVL
  • Appointment of a licensed Insolvency Practitioner to liquidate the company
  • Holding a creditors’ meeting to present the Statement of Affairs that explains your company’s financial standing
  • Placing an advert in The Gazette.

Are there any disadvantages for you as a director?

  • The fee for a CVL may require a personal contribution from directors if company assets are insufficient to meet this cost
  • The advert placed in The Gazette makes it a public process
  • It may reflect on you personally as a director
  • You may face investigation by the Insolvency Service if anything untoward is discovered by the Insolvency Practitioner.

Members’ Voluntary Liquidation

A good option when:

  • You want to retire and there is nobody else to take over your solvent company
  • You are able to officially declare that your company can repay its debts within a 12-month period
  • You simply do not want to be a director any longer, or be involved in running a business
  • You are looking for a tax-efficient way to close your business down.

A short breakdown of the process:

  • All company assets are valued, and a Declaration of Solvency prepared
  • You and any other directors sign the Declaration
  • A shareholders’ meeting is called to pass the resolution for voluntary winding-up
  • An advert is placed in The Gazette
  • Appointment of a licensed Insolvency Practitioner to undertake the process
  • The resolution is sent to Companies House.

Are there any disadvantages?

  • If company assets are not valued correctly and do not include contingent liabilities, there is a chance that on advertising the MVL, new creditors make a claim which sends the company into an insolvent position
  • Directors lose some control over company assets, the appointed Insolvency Practitioner taking on responsibility for their sale.

Compulsory Liquidation

If your company is facing compulsory liquidation, it means that one of your creditors has taken legal action against you. It could be that they have issued a Statutory Demand for Payment for a debt of £750 or more, which has remained unpaid.

Once a winding-up order has been issued by the court, your company will close down and all assets liquidated to provide payment to as many creditors as possible. One of the few advantages of compulsory liquidation that the creditor making the petition pays for the process.

Cessation of other creditor pressures may also come as a relief if you have been on the verge of insolvency for some time. During this liquidation process, you are, however, obliged to comply with the requests of the liquidator in terms of providing all information requested.

Insolvency Service investigations into director conduct

Failure or reluctance to provide the requested information may have serious consequences. All director conduct is investigated during liquidation, and a report sent to the Secretary of State at the end of the process.

This forms the basis of a decision as to whether further investigations are necessary. In reality, this could lead to accusations of wrongful trading or unfit conduct as a director, and affect your eligibility for directorship in the future. In serious cases, directors may face a prison sentence.

Begbies Traynor offers a free same-day consultation and an extensive UK office network

Contact our team

Latest News
York taxi company placed into administration
York taxi company placed into administration
On 25th November 2016, Rob Sadler and Dave Broadbent of Begbies Traynor in York were appointed as joint administrators of Six Five Nine Cars Ltd. The business, which has traded in York for over 15 yea…
40 jobs saved as gaming retailer sold out of administration
40 jobs saved as gaming retailer sold out of administration
Administrators of a South West-based gaming retailer have succeeded in saving 40 jobs at the company after securing the sale of the business, including 12 out of 15 of its High Street stores. Business…
Nearly 100 jobs saved as bars and restaurants are sold out of administration
Nearly 100 jobs saved as bars and restaurants are sold out of administration
Almost 100 jobs have been saved by the successful sale out of administration of a number of Midlands bars and restaurants. Town and Country Inns plc appointed business recovery and rescue specialists …
Begbies Traynor opens new office in Taunton
Begbies Traynor opens new office in Taunton
The UK's leading independent business recovery practice, Begbies Traynor, has opened an office in Taunton.  The move will enable the firm to build on work it has already done in the town and with the…
Brexit uncertainty puts the brake on London businesses
Brexit uncertainty puts the brake on London businesses
New research reveals that British businesses from Land's End to John o' Groats have shown surprising resilience since the EU Referendum result was announced, with levels of financial distress falling…
UK businesses remain resilient in the face of Brexit
UK businesses remain resilient in the face of Brexit
UK businesses across nearly every sector of the economy were showing positive signs of stability following the EU Referendum, new research from Begbies Traynor, the UK’s leading independent insolven…

Advice You Can Trust

Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ACCA (the Association of Chartered Certified Accountants) ICAS | The Institute of Chartered Accountants of Scotland