Company Liquidation Procedure - What you need to know

The company liquidation procedure is started by the directors, they tell the shareholders the company is no longer viable, it cannot meet creditor payments and or it has threats of legal action.

The directors realise that the company is insolvent and they must stop trading. The shareholders then ask a licensed insolvency practitioner to call a creditors meeting as soon as possible. This must be not less than 14 days notice, but it is usually 21 or so days.

The nominated liquidator, who must be a licensed insolvency practitioner, asks the directors for a list of all known creditors and he or she writes formally to them with a creditors meeting notice  (see here for examples of creditor meeting notices)

At this meeting the creditors vote to appoint a liquidator.

A vote is usually taken and more than 50% of the creditors must vote in favour of the nominated liquidator, if 50% vote for another liquidator then he or she will generally be appointed in place of the nominated liquidator.

So, this is why it's called Creditors Voluntary Liquidation. It's very common, quick and a very powerful way to close a business and deal with things properly. You can get on with a new business or job, the company is closed, leases cancelled and all the staff made redundant.

What does a liquidator do?

He or she “runs" the liquidation, fills out all the forms, calls all meetings and investigates the conduct of the directors before the liquidation happened. He collects assets and turns them into cash. He then works out the debts and pays the creditors from the assets, if there were any.

This is called paying a dividend to creditors. Often the dividend is very little or zero. This is because assets tend to be sold for small amounts of money by liquidators as there are very few buyers.

What do we do as directors?

Once the company is "in liquidation" the directors have to fill out a detailed questionnaire for the liquidator. They MUST provide all of the company's books and records to the liquidator. After this there is a creditors' meeting which a director must attend. After that, very little else usually.

You must comply with the liquidators’ request for information, it is a criminal offence not to do so.

Can I start another company with the same name?

This is a very common question and we would always advise that directors should take great care. You must not trade with a similar name as the previously liquidated company without careful legal advice. Breaching s216 Insolvency Act 1986 is a possible criminal offence. We can guide you through this possible minefield.

Can I become a director of another company if my company is liquidated?

Yes! Don't worry, you can be a director of another company (remember s216 above). But always act properly, don't take chances and think you are a smarter than the law. You aren't, lots of people think they are and end up in personal financial trouble. Call us now, ask all the questions you want for free. Call now for advice on 0800 9700539.

Summary: ACT NOW while you still can!

If the business has no future and very little cash, debtors or small asset values, get it into liquidation BEFORE it runs out of cash and assets to pay for the liquidation.

This is the common failing of many directors, they think something will turn up and fail to act soon enough. Their business ends up with no assets and the company ends up facing winding up petitions This is more risky for the directors than voluntary liquidation.

Company Liquidation Procedure