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What are Limited Company Liquidations?

A liquidation is where the assets of a company are sold to generate cash. There are two main types and it depends on the situation of the company as to which is the right one.


1. Creditors Voluntary Liquidation (CVL): 

A Creditors Voluntary Liquidation is used when a company is insolvent (can't pay its debts as and when they fall due) and:

- has assets that can be sold to generate cash

- owes money to people

2. Members Voluntary Liquidation (MVL):

You may choose members’ voluntary liquidation if your company is ‘solvent’ (can pay its debts) and:

- you want to retire

- you no longer want to run a company

Liquidating a limited company

Liquidation probably feels a little intimidating right now, you’ve worked hard to get your business up and running, and now you’re looking at closing it. Before going much further, you will want to make sure that it’s the right choice for you.

It's also important to note that a liquidation can only be carried out by a licensed Insolvency Practitioner (Liquidator), all the Insolvency Practitioners we use are fully licensed.

Please note, this page is mainly about Creditors Voluntary Liquidations (CVLs).


Is a Creditors Voluntary Liquidation right for you?

For many businesses liquidation is the right solution for their situation. Whatever the cause of your problems, liquidation is right if:

  • Your business is long term insolvent (can't pay it's debts).
  • You have no realistic way to repay your creditors.
  • You would like to start the company debt free as part of a recovery procedure.
  • You’ve had enough.

The benefits of Liquidation are:

  • You can start again with a clean slate.
  • It doesn’t mean that you have to give up in business, for many directors it can be the beginning of something new.
  • You aren’t liable for the unsecured debt, even tax debts owed solely by the company dies with it.
  • You are usually able to buy the assets of the company out of liquidation.

Is your Company Insolvent?

Sometimes it can be difficult to gauge if your business is Insolvent or not.

There are so many different opinions on the matter, yet, when it comes down to it, all you have to do is ask yourself:

"Can I pay the bills as they fall due?"

If the answer is ‘Yes’ then you are not Insolvent – if you still want to look at closing your business then it is a Solvent Liquidation (Members Voluntary Liquidation) or Dissolution that you’ll need.

If it is no then your business could well be considered to be Insolvent, and this means your responsibilities as a director changes.


Is this a long term problem?

It is tempting to say that you could get a lot of sales in next week, and that will change the whole situation. It probably would as well, but ask yourself how likely is that to happen.

If you have a temporary cash flow problem then a Liquidation is probably going to be overkill, you would probably be better with a Voluntary Arrangement or an informal agreement with your creditors.


How much does a Limited Company Liquidation cost?

Usually a liquidation costs between £2,500 and £5,000+VAT, however, in a lot of cases it will end up costing the director nothing! Liquidations are funded by the sale of any assets in the company (if there are no assets then Administrative dissolution my be a better option, find out more here).

If a liquidation is necessary then it may even be able to be funded by a redundancy claim as explained below.


You may be able to claim £12,000 redundancy (Creditors Voluntary Liquidations only)

If you are a director of a limited company – which has been trading for over two years – and you are considering closing the company due to financial struggles (i.e. HMRC debts, creditor pressure, cash flow worries, potential insolvency), it is likely that you can claim for director redundancy payment.

The average UK claim is £12,000 and this money can be used for any liquidation costs if necessary.

In addition, it's likely you can claim for other statutory entitlements such as notice pay, holiday pay and unpaid wages.

If you do meet the criteria, claims can be made from the National Insurance Fund via the Redundancy Payments Service (RPS), and redundancy payments are tax-free. If you are able to make a claim we'll help you with everything!


So what are the steps involved?

  1. Appointment

  • Firstly, you'll need to find an Insolvency Practitioner (IP); this is the person who will be in charge of the liquidation process.
  • They will gather the information that they need from the director, including company accounts, records, and also creditor, asset and cash flow information.
  • This information will be organised and official documents will be written up.
  • An assessment of the Statement of Affairs could be included here.
  • If the company is entering an MVL (Member’s Voluntary Liquidation), a Declaration of Solvency will also need to be signed at this point.
  1. Gazette Publication

  • The proposed action must be advertised in the London Gazette (which is now solely an online publication).
  • This is mandatory for all companies that are proposing closure, in the interest of creditors; it enables them to submit their claims to the correct party.
  1. MOCs (Meeting of Creditors)

  • Next, creditors are corresponded with. They must be given a certain period of time to respond…
  • They will either be notified at least 7 days before the creditors meeting, or given notice that unless they object to the process it will be going ahead.

Note here;

Until very recently, physical creditors meetings were required, but this process can now be done virtually; it is down to the liquidator which path they will take, but increasingly, virtual meetings will now become the norm.

Deemed Consent;

It is now possible for liquidators to assume that creditors consent to the liquidation unless they have objected to the process. This is referred to as ‘deemed consent’. See our blog post on the recent changes here.


  • If creditors meetings are held (virtually or otherwise), the intended IP will lead the meeting, although the company Director is technically the chairman.
  • These meetings are usually completely stress-free; creditors will vote to confirm that Liquidating the company is it’s best option, and that the liquidator can be officially appointed to oversee the liquidation.
  1. Liquidation (of assets, if any)

  • The term liquidation actually refers to the sale and disbursement of the company assets i.e. turning something physical into ‘liquid’ cash.
  • The firm’s assets will be sold at their highest possible value, and the cash will be used to pay off any company liabilities.
  • Usually, items will be auctioned, but it is possible for Directors to buy the assets themselves. However, the price must match that of an independent valuation, and this must be deemed to be in the best interests of the creditors.
  • After the assets have been sold, the cost of the Liquidation will be paid, and creditor claims will be settled.

Of course, in cases where there are little or no company-owned assets, the liquidators must still be paid; in which case, either an instalment agreement would be drawn up initially, or the IP could even take on instruction on the understanding that a proportion of the director’s redundancy claim would be used to fund the liquidation when the payment has come through.



Find out how much it will will cost to liquidate your company

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I approached Forbes Burton to help me out of a situation that I was not capable of resolving by myself. I was in desperate need of some guidance and advice which was given freely and willingly on a regular basis. I was kept informed of developments at all stages of the process, and at no time was I contacted by any of my Creditors – a real worry to me.

Jerry (Company name withheld for confidentiality)

Speak to our experts about a liquidating your company today

Rick Smith

Managing Director

01472 254918


Ben Westoby

Senior Client Manager

01472 254916


Chris Leadley

Marketing Manager

01472 254911


Emma Blyth

Senior Client Manager

01472 254919