Limited Company Liquidation
Limited company liquidation is a formal insolvency procedure used to close down a company. There are different ways of liquidating a limited company, and the best option will depend on whether the company is solvent or insolvent. Company directors can liquidate voluntarily, or the courts can force closure to pay outstanding debts.
How do you liquidate a limited company?
- The first step before liquidating your company is to appoint a licensed liquidator. They will assess your situation and ensure everything is handled legally. If your limited company is insolvent (it cannot pay its debts), you must stop trading before the liquidation can begin.
- Once appointed, the liquidator will take over communicating with HMRC, Banks, and all other creditors. Where possible, they will sell company assets to repay the debts, or if the company is solvent, the assets will be distributed among the shareholders.
- Once the ltd company liquidation has been completed, the liquidator will remove the company from the register and officially close it.
Members’ Voluntary Liquidation (MVL)
If the company is solvent and the Directors wish to shut it down, an MVL is a compliant and tax-efficient way to close and liquidate assets.
Creditors’ Voluntary Liquidation (CVL)
When an insolvent company closes down voluntarily, a CVL liquidates the company and helps directors avoid wrongful trading claims and manage creditors.
Compulsory Liquidation
If a company cannot pay its debts, a creditor forces liquidation through a winding-up petition, and the courts force the company to close.
How much does it cost to liquidate a company?
The cost of liquidating a limited company depends on whether it is solvent or insolvent. Because solvent liquidations (MVLs) can be a more straightforward closure process, the cost of an MVL is usually more affordable than other insolvent closure options.
For insolvent companies, the cost of a CVL starts from £3,000 for our pre-appointment fees.
Once we’ve been appointed and put the company into liquidation, there will be post-appointment fees, which vary case by case. Once we are aware of your situation, we will calculate the costs, which cover:
- Processing creditor claims.
- Valuing and selling all company assets.
- Investigations into the running of the company and conduct of all directors running up to the liquidation process.
- Reporting on the liquidation process and current status.
- Fair distribution of liquidation proceeds to creditors.
How do you pay for a company liquidation?
The liquidator usually covers the liquidation costs by selling company assets. Directors may need to contribute personally to the professional fees if there are no assets to sell. If this isn’t an option, we can discuss the best affordable insolvency routes with you.
How Long Does the Liquidation Process Take?
Once you have appointed a licensed insolvency practitioner, liquidation can begin within a few weeks. Depending on the complexity of the case, the full process, including selling assets and closing the company, can take several months.
Which Liquidation Process Is Right for Your Business?
If your company is insolvent and unable to recover, a CVL is the best course of action. If you’re closing a solvent company, an MVL can provide tax advantages.
Are Directors Personally Liable for Company Debts?
In most cases, directors of a limited company aren’t personally responsible for debts unless they’ve signed a personal guarantee, engaged in wrongful trading, or misused company funds. The liquidation process ensures that debts are dealt with fairly, and creditors can’t chase directors for repayment unless there is evidence of misconduct.
What Happens After You Liquidate a Company?
Once a company is liquidated, it is removed from the Companies House register, and its debts are written off. As long as there are no mistrading issues found by the liquidator, you can start a new business as a director. But there are restrictions on what you can name it. For five years after liquidating, Directors can’t form, manage or promote a business with the same or a similar name to the closed company.