Liquidating a Limited Company
Star Harford • 26 January 2022
If your business is struggling or in debt then you can choose to liquidate your limited company. This is also known as winding-up your company. Liquidating your limited company means your company will stop doing business and cease to exist once it is removed from the register at Companies House. This is also known as being struck off.
When a company is liquidated, any assets it has are used to pay off its debts. Following this, any leftover money will be shared amongst the company's shareholders. If the money hasn't been shared out before the company is removed from the Companies House register then the company bank account will be frozen and you will need to apply for a validation order in order to access the account.
There are three different types of liquidation. Creditors Voluntary Liquidation is where your company can't pay off its debts and the creditors are involved when liquidating. Compulsory Liquidation is where the company can't pay off its debts and you apply to a court to liquidate it. Finally, Members Voluntary Liquidation is where a company can pay off its debts but you wish to close it anyway. Your company can also be forced into liquidation if it can't pay off its debts.
A director of a company can decide to liquidate if the company is insolvent. This means the company cant pay its debts. To do this there must be agreement from at least 75% of shareholders. A meeting should be called where shareholders can vote on winding-up the company. A winding-up resolution is then made.
At this point an authorised Insolvency Practitioner must be appointed as the liquidator who will be in charge of liquidating the company. We work closely with Insolvency Practitioners who we trust and our advisors can pass you directly to them if you decide to liquidate your company. The resolution must be sent to Companies House within 15 days. The resolution must also still be advertised in The Gazette within 14 days.
The director of a company can also ask a court to order the company to be liquidated. This is known as compulsory liquidation. The company would need to have £750 or more in debt and the director would need to prove to the court that the company couldn't afford to pay these debts. In this circumstance there would still need to be agreement from 75% of shareholders.
There are fees to liquidate a company and it will cost £1,600 to submit the petition and £280 for the court hearing. If the director can't afford these fees there are now options to pay in instalments.
After you have applied for liquidation and, if the court accepts your petition, you will be given a date for the court hearing. You must give a copy of the petition to your company and fill in a court form called a certificate of service to let the court know this has been done. You must also place an advert in The Gazette at least 7 days before the hearing and send a copy of the advert to the court. The company director or their solicitor must attend the court hearing but will not be called upon to give evidence. The court can decide to give a winding-up order and then they will put an official receiver in charge of the liquidation.
You may choose to liquidate a company which is not in debt if you do not want to run it anymore. This could be because you want to retire or step down and no one else wants to run the business. In this instance you would choose voluntary liquidation. To do this you would make a Declaration of Solvency, which is a statement saying that the directors have assessed the company and believe it can pay its debts, including a plan to pay the debts off. You would also include company and directors details and information about any company assets. Following this there is a need to hold a general meeting with shareholders present and appoint an authorised Insolvency Practitioner as a liquidator. The Insolvency Practitioner will then be in charge of winding-up the company. The resolution also needs to be advertised in the Gazette and sent to the Companies House.
What does the liquidator do?
An authorised Insolvency Practitioner or Official Receiver will act as the liquidator and run the liquidation process. Their job is to settle legal disputes and outstanding contracts, sell company assets and pay creditors, liquidation costs and VAT bills. They will also deal with the relevant authorities, sort out any paperwork and get the company removed from the companies register. The liquidator takes over the business from the director who no longer has any control of the business.
How do I find a liquidator?
The debt specialists at LCI Limited Company Insolvency only partner with Insolvency Practitioners that we trust. We can discuss your circumstances with you, offer you free advice and find an Insolvency Practitioner for you. If you are considering company liquidation and would like to take advantage of this free help then please fill in this online form. Once of our advisors will give you a call as soon as they are free.
