Different ways to wind up a company voluntarily
Depending on your company’s financial position, there are a few different routes.
Winding up a company
Deciding to wind up a company can be a tough decision, especially if things haven’t gone to plan and you hoped for a different outcome. But it can also be a way to close a company that’s no longer needed and has served its purpose. The winding up process gives shareholders support in sorting out what’s left, whether that’s settling debts to creditors or returning funds to shareholders.
What does it mean to voluntarily wind up a company?
Voluntary winding up is a formal legal process used to close a limited company, but it usually must be agreed by at least 75% of its shareholders. It involves appointing a licensed Insolvency Practitioner to take control of the company, realise its assets, settle any outstanding liabilities, and distribute any remaining funds to shareholders if the company is solvent.
The process ensures that all financial and legal obligations are properly dealt with before the company is formally dissolved and struck off the Companies House register.
Creditors’ Voluntary Liquidation (CVL)
Used when the company is insolvent and can’t pay its debts.
- Initiated by directors and approved by shareholders
- Creditors are involved in the process
- Asset sales go towards repaying outstanding debts
- A licensed Insolvency Practitioner manages everything from start to finish
Members’ Voluntary Liquidation (MVL)
Used when the company is solvent and able to settle all its liabilities.
- Common when directors want to retire or step away
- Shareholders start the process
- After all debts and costs are settled, the remaining funds are paid out to shareholders
Dissolution or strike-off
If the company has no debts or assets and has not traded in the last three months, a strike-off might be the simplest option.
- Initiated by company directors
- It’s a cost-effective way to close a dormant or unused company
- Certain conditions need to be met
Why choose a formal winding-up process?
There are a few reasons why directors opt for a structured closure:
1. More control
You’re making the decision rather than waiting for creditors or HMRC to act.
2. Protects your reputation
Winding up properly shows you’re doing the right thing, especially in tough financial situations.
3. Keeps things clear
A formal process keeps everyone updated on the progress of liquidation. Having a liquidator speak to your creditors on your behalf reduces the risk of confusion or disputes and removes any additional stress from shareholders.
4. Professional support
The benefit of an Insolvency Practitioner managing the process is that everything is handled correctly, and they’ll ensure you follow your legal obligations.
What to consider before winding up
- If you are voluntarily liquidating, you must appoint a licensed insolvency practitioner, as you can’t do it without one.
- They’ll talk you through your options and guide you through every step, whether that’s a CVL, MVL, or another route that suits your situation.
- At The Liquidation Centre, we’ve supported thousands of directors through the winding-up process. With over 20 years’ experience, our team is here to help you move forward with confidence and the right advice.