Existing Cases: 0161 837 1700 New Enquiries: 0800 063 9221

What happens when a company goes into liquidation?

When a company goes into liquidation its assets are sold to repay creditors, the business closes down, and its name is removed from the register at Companies House. There are two main types of liquidation process, solvent and insolvent liquidation.

Solvent liquidation usually involves a director’s retirement, or may be the closure process chosen when a business serves no further useful purpose. This is called a Members’ Voluntary Liquidation (MVL).

Insolvent liquidation occurs when a company cannot carry on for financial reasons. The overall aim of an insolvent liquidation process is to provide a dividend for all classes of creditor, but it is often the case that unsecured creditors receive little, if any, return.

Begbies Traynor are licensed insolvency practitioners with vast experience in all industries, and are available for appointment as liquidator for both solvent and insolvent companies.

Insolvent liquidation procedures

Insolvent liquidation means that a company is closing because it cannot pay its bills as they fall due (cash flow insolvency), or the value of business assets is less than its liabilities (balance sheet insolvency).

There are two insolvent liquidation processes:

Creditors’ Voluntary Liquidation (CVL)

When creditors are threatening to take legal action against a company, and there is no real hope of rescue or recovery, it is often in the interests of all parties to enter a Creditors’ Voluntary Liquidation.

This process maximises creditors’ potential to receive a return as all company assets will be sold as part of the process. The appointed liquidator works on behalf of creditors as a whole rather than company directors, and their main role is to collect in and realise all business assets.

Brief timeline of a CVL

  • Shareholders vote on whether to pass a ‘winding-up resolution’ and place the company into voluntary liquidation
  • The winding-up resolution is sent to Companies House within 15 days of the shareholder vote
  • A notice must also be placed in the Gazette within 14 days
  • 75% or more (by value) of creditors vote on whether to accept the IP’s proposal, and on the appointment of a liquidator to carry out the process
  • Assets are realised, and funds distributed among creditor groups, according to the statutory hierarchy of repayment
  • The conduct of directors leading up to the insolvency is investigated for instances of wrongful or illegal trading.

Compulsory liquidation

While a company is placed into voluntary liquidation by its directors, in the case of compulsory liquidation, it is a creditor which forces a company into this situation. If a creditor is owed £750 or more by the debtor company, they may be eligible to petition the court for its winding-up.

If the courts then grant a winding-up order, a liquidator is appointed and business assets are liquidated in order to realise returns for outstanding creditors.

Solvent liquidation - MVL

An MVL procedure also requires the input of a licensed insolvency practitioner, and results in the closure of a company following distribution of its assets amongst creditors and shareholders.

Because it is a solvent liquidation process, creditors are repaid in full, and a Declaration of Solvency must be signed by the majority of directors attesting to the fact that this will be possible.

  • No more than five weeks later, shareholders pass the resolution needed to wind-up the company, and appoint a licensed IP to administer the process
  • A notice is placed in the Gazette within 14 days of the resolution being passed, and the signed Declaration of Solvency needs to be sent to Companies House within 15 days

What does a liquidator do?

As we have mentioned, the appointed liquidator will realise company assets and make distributions to creditors. Although these are the main responsibilities, a liquidator will carry out other tasks, including:

  • Dealing with any outstanding contracts
  • Dispensing information to creditors throughout the process
  • Removing the company from the register at Companies House
  • Interviewing directors as part of their investigations

If you require more information on corporate liquidation, our experts at Begbies Traynor can help. We offer an initial appointment free-of-charge to quickly establish your needs.

 

76 Regional UK Offices

Find your local Begbies Traynor office and speak to an adviser today.

Find your Local Office
0800 063 9221

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0800 464 0871

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0161 837 1700

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
BTG Advisory accelerates growth with appointment of four new partners to its London office
BTG Advisory, the boutique advisory arm of Begbies Traynor Group announces the appointment of four new partners to its Canary Wharf office
Read More →
 
Eighty jobs saved with £1m sale of engineering business
South Yorkshire company Newburgh Precision rescued through administration
Sale enables 75-year-old business to continue trading
Read More →
 
Join thousands of professionals by signing up for our updates
Analysis and Opinion from our Partners
Top Industry News
Register Now →
 

Advice you can trust

We are accredited by the following industry leading organisations

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

Contact the Begbies Traynor team

or Find your Nearest Office

Here at Begbies Traynor Group 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

Processing...