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Worried Director What Will Happen To Me After Liquidation?

12th October, 2023
Keith Steven

Written ByKeith Steven

Managing Director

07879 555349

Keith is the author of the content on this comprehensive rescue, turnaround and insolvency website. He is the managing director of KSA Group Ltd - a specialist firm of turnaround and licensed insolvency practitioners. Keith was nominated for Turnaround Practitioner of the Year 2014 at the National Insolvency and Rescue Awards in 2014.

Keith Steven
  • So how will liquidation affect me and how long does it take?
  • What is Creditors Voluntary Liquidation and what does it mean for me?
  • What if I have signed personal guarantees?
  • I have heard about directors being able to claim redundancy in liquidation

“A man in the pub said I cannot be a director of any other company if I liquidate my company. Is this true?”

Actually, this statement is entirely false! Misconceptions like this frequently arise from individuals with limited understanding of the subject matter. Such misinformation can cause undue anxiety for directors considering liquidation, fearing it might personally affect them. Guess what? Listening to bar room experts, inexperienced accountants, or no insolvency specialist lawyers can stop decisions being made, this failure to make a decision is really what could land you in trouble.

So how will liquidation affect me and how long does it take?

Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time. What is more, if as a director, you have been compliant and on the payroll for many years, you can actually claim redundancy from the government like any other employee. But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse such as losing your house. So, act now and get help for your company and more importantly start reducing your own risks.

Voluntary liquidation is the quickest most efficient way to deal with an insolvent company that has no future. As a director of an insolvent company, you are at risk if you do not act. This risk RISES the longer you don’t act to put the company into liquidation.

If you fail to act and the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years. This is known as a conduct report on each director.  If the OR can prove there was wrongful trading where, for instance, you have taken credit from a supplier or took deposits from customers when you knew that it was highly unlikely that you could pay them back, then you could be made personally liable.

This is known as the “lifting of the veil of incorporation” that protects directors under limited liability. If this happens then you could made liable for PAYE, VAT and creditors monies from the time that you should have known the company had no reasonable prospect of surviving the problems it faced.

Additionally, the directors may face disqualification proceedings under the Company Directors Disqualification Act 1986 for up to 15 years, they can be fined and may face the loss of personal assets like your home, or even personal bankruptcy.

Look, if you as directors have acted naively you may not know that you have broken these laws, but now you do know, it is vital to ensure that you protect yourself as a director by acting quickly to cease trading and put the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are solved.

What is Creditors Voluntary Liquidation and what does it mean for me?

In short, liquidation usually means, the company’s trading stops and it’s assets are turned into cash or “liquidated”.

All other possible liabilities, like employment liabilities, landlord’s rent or payments to lease companies are stopped. It really is the end of the company, but the “business” may survive if a phoenix is organised. Liquidation is a powerful way to END creditor pressure and let you get on with your life.

What if I have signed personal guarantees?

If you have signed personal guarantees or indemnities to lenders, then the liquidation could lead to them being called in if the bank cannot get its money back from the company. There is little that can be done about that, but you should not delay decisions on liquidation to try and prevent a PG being called in: just think what ALL of the company’s debts landing on your shoulders would do. Also it should be noted that HMRC now rank ahead of floating charge holders in any liquidation since December 2020.  Consequently, this may well mean that lenders that you have personally guaranteed will get less recovery hence exposing you more.

All banks will agree a deal to repay the PG over time – provided you work with the bank to reduce their exposure.

One great piece of FREE advice – always make sure that ALL tax returns, VAT returns and annual returns have been completed and sent in and that other “compliance” issues are dealt with wherever possible. These are important processes and will help protect you as individual directors. It shows that you have been acting properly.


I have heard about directors being able to claim redundancy in liquidation

If you have been employed by the company and made payments via PAYE then you will be able to claim redundancy from the government and this is in fact a very simple process (20 minutes to fill out a form and we can help with that) so there is no need really to employ a third party to make a claim.  This process has been open to fraud so the HMRC are cracking down on operators that claim to be able to get money back when there is not enough “paperwork”.  It isn’t worth the risk.  If it sounds too good to be true then it probably is!

You need to learn more about the options. This is clearly a general guide so, if you have any worries at all, please, just call us and we will talk you through the situation free and with expert guidance for your situation. Call one of our advisors or if you prefer, call our IPs (insolvency practitioners) now:

Just one CALL will help relieve the stress and get you out of the mess.

Why not call 08009700539 or 020 7887 2667 now?

We could help you start the liquidation process today.

(8.15am till 5.00pm; Out of hours call on 07833 240747, Wayne Harrison (IP)  or Eric Walls (IP) on 07787 278527)

Finally, please remember this: NO BUSINESS is worth losing your health, relationships, marriages or your children over. Act properly, take advice, get the problem sorted and then get on with your life. In a little while the stress will go and you can focus on other things that are more important.

Want more information on liquidation? Get our new free 2023 Experts Complete Guide to Creditors Voluntary Liquidation that covers Bounce Back Loans

We are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue and company rescue, we can help solve your problems but only if you talk to us. Call 0800 9700539 for help.or email us your worries at


What Happens To A Company After It Goes Into Liquidation?

After a company goes into a liquidation process, its assets, i.e. property and stock, are "liquidated" - turned into cash for payment to the company's creditors, in order of priority. This results in your company being removed from the register at Companies House as it ceases to exist.There are three types of liquidation:Creditors Voluntary Liquidation Compulsory Liquidation Members Voluntary Liquidation (cash is returned to the members as the company is solvent)Note that shareholders and directors start the voluntary liquidation process. However, in compulsory liquidation, the creditors start the process by applying for a court order. What is Creditors Voluntary Liquidation? Creditors voluntary liquidation (CVL) is the most common process in the UK, with about 15,000 of these liquidations each typical year.Usually, the company runs out of cash and cannot pay its debts on time. The directors are concerned that the business is simply not viable as creditors threaten legal action. In essence, it is appearing as an 'insolvent company'.The company directors then ask a liquidator, who must be a licensed insolvency practitioner (IP), to convene a meeting of the company's creditors within 14 days. At the meeting, which is now often held virtually, the IP will present a statement of affairs of the company to outline the current position and explain the procedure. The creditors then vote on the appointment of the liquidator to "liquidate" the assets to try and repay them (hence it is called a "creditors" liquidation).Once the liquidator is appointed, the directors no longer have any control or duties in relation to the company, but they are duty-bound to cooperate with the licensed insolvency practitioner and provide information in a timely manner. The IP will then look into the directors' and if there has been very bad practice, misfeasance or fraud, they may become subject to a disqualification. What happens to the assets after liquidation? After the company has gone into liquidation the assets (if there are any!) are sold in order to pay back the creditors.  The Insolvency Practitioner will often employ a Chartered Surveyor to achieve the best price so they can't be accused of selling assets on the cheap.  Sometimes the directors can buy back the assets after liquidation but again they must be at a fair price. What happens to the debts after the liquidation? If the assets sold do not cover any or part of the debts then they are effectively written off.  However, if there are some monies to be distributed then the creditors are paid in accordance with their ranking.  See this page for the creditors ranking.   Generally in a liquidation the unsecured creditors get nothing. What happens to the shares after liquidation? The shareholders are the very last in line for getting any payout from the sale of assets.  So, basically the shares are worthless.  Any shareholder can write these losses off against tax. What are the implications for the directors after the liquidation?As a director, if you owe the company money, i.e. have an overdrawn directors loan account, then the liquidator will seek to claim this from you. If the loan is substantial and not justifiable, they will take action against you. Personal guarantees will be called in if applicable as lenders are unlikely to get all their money back. The liquidator will investigate your conduct, but as long as you have behaved reasonably and properly then there shouldn't be anything to worry about. Be aware that the use of Bounce Back Loans to fund personal spending over and above what would be expected in normal times could cause you problems. See this page for more information. You may find that gaining senior employment in sensitive government departments/insurance companies and banking will be a bit more difficult as you may need to go through a "vetting procedure."Can the directors start a new company after liquidating the old one? You can liquidate a company and start the same or a new business again, but only under strict rules and conditions. Restarting is a potential legal "minefield" and you need to take proper advice.In summary;Most importantly, you cannot use the same or similar trade or business name as the liquidated company without leave of the court or permission from the IP. HMRC will likely ask for a VAT deposit from the new company if they have been a significant creditor in the previous company. You may find that business insurance will be a bit more expensive, or less choice, for you in any new company.Call us or read our Experts Guide to Creditors Voluntary Liquidation (see link below) if you want more details. Likewise, call us on 0800 9700539 for a free chat through your company's issues.Why not download our 2022 voluntary liquidation guide?Additionally, if you would like to liquidate your company, call us on 0800 9700539 or you can fill out a form on our website and get a quote in minutes. We can talk you through the process, organise the legal paperwork and begin proceedings. What Happens In Compulsory Liquidation? A compulsory liquidation is when the company's creditors have lost all patience to try to collect the debt. The debt must be over £750, undisputed, and the creditor must have notified the debtor of its intent to collect the debt. This often involves issuing a statutory demand first. If the debtor fails to pay the Statutory Demand in 21 days and does not dispute the debt, then the creditor may issue a winding-up petition.If the judge grants the winding-up order, then the official receiver will interview the director and liquidate the assets of the business to try and repay the creditors. This process generally takes much longer than a voluntary liquidation and is more stressful and hassle for the directors involved. What is more, the official receiver has more resources and a willingness to use their powers to investigate the behaviour of the directors. They will also have more resources to pursue any money that the directors owe the company which could result in personal insolvency. Can I stop the process? Once a winding-up petition is issued then it is difficult to stop the process. The only way to stop the liquidation is to pay the debt or get the petitioner to agree to withdraw the petition. It may be possible to get an adjournment of the winding-up hearing to allow more time to find the funds or maybe even get a company voluntary arrangement organised, but you will need to move very quickly! What are the implications for the directors in a compulsory liquidation? As mentioned earlier, it is likely that the official receiver will more aggressively collect monies owed by the director to the company. The directors have to attend a lengthy interview process at the court. They also have more resources to use their powers to investigate the directors’ actions compared to a liquidator in a voluntary liquidation. What Happens In A Members Voluntary Liquidation? A Members Voluntary Liquidation (MVL) is the formal process to bring a solvent company to a close. It can be known a 'solvent liquidation'. A licensed insolvency practitioner is appointed as liquidator and will realise the company’s assets, settle any legal disputes and pay any outstanding creditors and then distribute the remaining surplus funds to the company’s shareholders/members. In a MVL, the company must have paid or be able to pay all of its creditors and contractual liabilities. Once the liquidator has completed these formalities and received clearance from HMRC, the company will be dissolved and formally removed from the companies register, meaning it will no longer be registered at companies house.An MVL requires 75% of shareholders who have been given notice of the meeting of members to pass the winding-up resolution.This type of liquidation is appropriate when a company plans to close or wants to reduce taxes.And now to some common questions, we hear: What is the process? Each type of liquidation has a similar yet unique approach. There are some basic steps that each liquidation involves:The appointment of an insolvency practitioner/liquidator Liquidation of the assets of the company. Creditors, in order of priority, are paid using the liquidated funds. Shareholders receive any extra cash once everyone else has been paid according to their priority.In most situations, the end result is the company ceasing to trade, thus being struck off the register at Companies House. How much time does it take? This is variable to each situation. Once the insolvency practitioner is appointed, it takes between 2 and 3 weeks for the company to be placed into liquidation.Remember:If you have received a statutory demand from a creditor, you only have 21 days to pay it, and if unable to be settled, a winding-up petition will be applied for by the creditor (since they have the right), which takes up to 2 weeks. Within 14 days of the winding-up petition, it is a legal requirement to conduct and engage in a winding-up hearing.Until the process is fully complete, the liquidator remains responsible in overseeing the process in its entirety. To find out more about the role of the liquidator, see our page here. How much does the process cost? The costs of liquidation can put directors off but not doing anything is likely to cost you more in the long run! Generally, the costs start at around £4000 + VAT. This would be for liquidating a company with a single creditor, such as having an unpaid Bounce Back Loan (BBL) or HMRC. For more than one creditor issue, we would expect the fee to be approximately £4,500 plus VAT. For more complex issues, including companies who have landlords, employees, BBLs and supplier debts we will provide a written quote after our meeting with the directors to discuss the company’s options. Do get in touch to discuss your company’s liquidation, don’t delay and hope the problem will go away! Liquidation is a highly regulated insolvency process and there are NO shortcuts. Who gets paid first after a company goes into liquidation? Employees If you are an employee of the business, you may not receive your last month's wages, but you will be able to claim from the redundancy payments office for arrears of pay, holiday pay, and money in lieu of notice. You are unlikely to receive any expenses that are owed to you. Please see our page for employees here. A creditor of the company Realistically, you are unlikely to receive much money in liquidation - maybe 5p in the £1. If you are a secured creditor, i.e. if you have a charge over the assets of the company, then you may receive more or even everything back, but it completely depends. For more information on who gets paid first in liquidation then see our page on creditors priority. 

What Happens To A Company After It Goes Into Liquidation?

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