Liquidation is essentially the final option for an insolvent company. It involves selling all of the company’s assets, using the raised funds to pay creditors and then closing the company down.

When to consider liquidation

Before liquidation is contemplated all recovery, options should be considered as Liquidation does, however, draw a line under company misfortunes and the concerns of directors. Liquidation can be voluntary or compulsory.

Voluntary Liquidation

Creditors Voluntary Liquidation (CVL) is initiated by the directors who, with shareholders, nominate an Insolvency Practitioner to wind up the insolvent company. Creditors formally make the appointment, hence the term CVL. The liquidator must be a licensed Insolvency Practitioner who will dispose of all company assets and share the proceeds with creditors in accordance with their adjudicated claims and priorities.

The liquidator will also report on the conduct of the directors in relation to the demise of the company. This may, from the Board’s perspective, appear hostile, although the liquidators will merely be fulfilling their statutory duty as required. This should show that the directors behaved responsibly and no wrongful trading took place.

Compulsory Liquidation

Compulsory liquidation is initiated by a creditor, or government agency such as HM Revenue and Customs, who can demonstrate that all reasonable steps to recover an undisputed debt have failed (e.g. debt collector). A winding up petition is served and a liquidator is appointed by the courts.

Either the official receiver or an IP will be appointed to act as liquidator.

Is it possible to continue trading after company liquidation?

In very rare circumstances, a company may be traded post liquidation, but this will be done by the Liquidators not the directors. All assets are sold, these funds are used to paid creditors and the company ceases trading.

How does company liquidation affect directors?

Providing their conduct is good, there need be no lasting consequences

Advice you can trust

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Compulsory Liquidation

Compulsory liquidation is initiated by a creditor, or government agency such as HM Revenue and Customs, who can demonstrate that all reasonable steps to recover an undisputed debt have failed (e.g. debt collector). A winding up petition is served and a liquidator is appointed by the courts.

Either the official receiver or an IP will be appointed to act as liquidator.

Is it possible to continue trading after company liquidation?

In very rare circumstances, a company may be traded post liquidation, but this will be done by the Liquidators not the directors. All assets are sold, these funds are used to paid creditors and the company ceases trading.

How does company liquidation affect directors?

Providing their conduct is good, there need be no lasting consequences

Advice you can trust

For peace of mind, why not ask our advice?
Request a free, no obligation, confidential consultation with one of our insolvency specialists today.