Company Liquidation Explained

Company liquidation explained

We get asked a lot of questions about company liquidation; what is it? How can it benefit my business?

We have put together a quick guide that explains exactly what company liquidation is, the effect it can have on your business and the steps you need to take to make it happen.

What is liquidation?

Company Liquidation is the process taken when closing a limited company, selling assets and dissolving the company from the official register.

This process tends to happen if you have cash flow problems on a regular basis and creditors are threatening to take enforcement action.

There are two types of liquidation that can be started by the directors of a company and it will depend on the situation of your company as to which is the right one to use:

1. Creditors Voluntary Liquidation (CVL) – Used when a company is insolvent (which means it cannot pay its debts as and when they fall due. This is also used if you have assets that can be sold to generate cash or owe people money)
2. Members Voluntary Liquidation (MVL) – Used when your company is solvent but you want to retire or you no longer need or want the company.

There is a third type of liquidation called compulsory liquidation, this is one that is forced upon the company by unhappy creditors and has to be processed through a court.

Generally it could be said that a creditors voluntary liquidation is better for the directors than a compulsory liquidation, so if your company is in difficulty is is best to speak to someone as early as possible.

The benefits of liquidation

There are many advantages to liquidating your company, one of the main benefits is that you don’t have to leave the world of business altogether.

Instead, you can have a clean slate and start fresh.

If you liquidate your company, you will not be liable for unsecured debt or tax debts as they will simply be voided with the company.

One of the biggest benefits is you will be able to buy the assets of the company out of liquidation.

What are the steps for liquidation?

1. Make an appointment 

The first thing you need to do is find an insolvency practitioner, this is the person who will be in charge of the liquidation process.

They will gather the information they need from the director and then official documents will be written up.

2. Gazette publication 

It is mandatory that all companies proposing closure must be advertised in the London Gazette as it enables them to submit their claims to the correct party.

3. Meeting of Creditors 

The next step is to correspond with creditors, they will either be notified at least 7 days before the creditors meeting or given notice that unless they object the process will be going ahead.

Creditors will vote to confirm that liquidating the company is the best option and that the liquidator can be officially appointed to oversee the liquidation.

4. Liquidation 

The firm’s assets will be sold at their highest possible value and the cash will be used to pay off any company liabilities.

The directors do have the chance to buy the assets themselves, however the price must match that of an independent valuation.

After all the assets have been sold, the cost of the liquidation will be paid and creditor claims will be settled.

How can Forbes Burton help you?

We can help you with liquidating your company and clear your business debts. We can ease your mind with our low cost, affordable limited company liquidations.

It is not guaranteed, but you may also be able to claim up to £9,000 in redundancy pay which can then be used towards any fees.

The team at Forbes Burton will do the work for you which will save you time and also take away the stress of having to sort out paperwork.

We will also make sure any outstanding company debts including HMRC tax arrears and loans are cleared.

Find out if your company qualifies for a Company Voluntary Liquidation via our questionnaire here. Once you have completed it, we will email you the results straight away.

If however, you know that liquidation is the right decision for your company then you can request a free liquidation quote here or call us on 0800 975 0380.