What is the process when a company goes into liquidation?

When a business enters a liquidation process, its property and shares are “liquidated,” or converted into cash, and distributed to the creditors of the business in accordance with their order of precedence. As a consequence, your business no longer exists and is deleted from Companies House’s registry.

Three different forms of liquidation exist:

  • Creditors Liquidation voluntarily
  • Required Liquidation
  • Voluntary Liquidation of Members (cash is returned to the members as the company is solvent)
  • Be aware that the process of voluntary liquidation is initiated by shareholders and directors. However, in a forced liquidation, the process is initiated by the creditors by requesting a court order.

Following the appointment of the liquidator, the directors are no longer in charge of or responsible for the firm, but they are still required to work with the registered insolvency practitioner and give timely information. The IP will then investigate the directors, and they could be susceptible to disqualification if there have been exceptionally poor practises, misbehaviour, or fraud.

The primary responsibility of the liquidator in this case is to realise the assets and distribute any proceeds to creditors, i.e., write off any outstanding obligations.

What effects will this have on the directors?

A firm may be liquidated and then reopened as the same or a different enterprise, but only under very specific guidelines. You should get appropriate legal counsel before restarting since it may be a legal “minefield.”

In Summary:

  • Most significantly, you are not permitted to use the same or a confusingly similar trade or business name as the collapsed firm without the court’s or the IP’s approval.
  • If HMRC was a significant creditor in the old firm, they would probably want a VAT deposit from the new company.
  • The liquidator will try to collect any money you owe the firm as a director, such as money from an overdrawn directors loan account. They will take action against you if the loan is substantial and unjustifiable.
  • If necessary, personal guarantees will be requested since lenders are unlikely to get a full refund.
  • In any new firm, you can discover that business insurance is a little more costly or offers fewer options for you.
  • Although the liquidator will look into your behaviour, as long as you have acted responsibly and sensibly, there shouldn’t be any cause for concern.
  • Be advised that using Bounce Back Loans to finance personal expenses over what would be reasonable under regular circumstances may result in complications for you. More details are available on this page.
  • It could be a little harder for you to get top positions in sensitive government agencies, insurance firms, and financial institutions since you might have to go through a “vetting process.”

If you want more information, contact us or read our Experts Guide to Creditors Voluntary Company Liquidation . Call us at for a free consultation on the problems facing your business.

Additionally, you may acquire an estimate quickly by filling out a form on our website at or by calling us at if you’d want to liquidate your business. We can walk you through the steps, prepare the paperwork, and start the legal procedure.

How Does Compulsory Liquidation Work?

When the company’s creditors are no longer willing to attempt and collect the debt, a forced liquidation is required. The creditor must have informed the debtor of its intention to collect the debt, and it must be an uncontested obligation. Frequently, this includes first initiating a statutory demand. If the court issues the winding-up order, the official receiver will speak with the director and attempt to recoup the debt by selling the company’s assets.

The directors involved often experience greater stress and difficulty throughout this procedure, which typically lasts far longer than a voluntary liquidation. Additionally, the official receiver is better equipped and eager to utilise their authority to look into the directors’ behaviour. Additionally, they will be better equipped to prosecute any debts the directors may have to the business, which might lead to their personal bankruptcy.

Can I halt the operation?

Once a winding-up petition is filed, it is challenging to halt the procedure. Paying the debt or convincing the petitioner to drop the petition are the only two options for preventing the liquidation. You will need to act fast if you want to request a postponement of the winding-up hearing so you have more time to locate the money or set up a corporate voluntary arrangement.

So what do I need to do?

After reading this material, if you believe this method applies to you or if you need further guidance, please contact us to go through your alternatives.

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