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Liquidating your limited company


Author: Kareema Ali

By liquidating your limited company, you are formally entering a procedure to close your company.

With the closure of the company, all assets will be liquidated, and the proceeds will be used to pay off creditors, any money that is left from the assets of the company will go to the shareholders. If, by the time the company has been removed from the register and the money has not been delegated out it will go to the state. You will need a validation order to gain access to the company's bank account once the process begins.

If your company does go into liquidation, at first it will stop all business and employing staff, it will then be removed off Companies House as if it no longer exists. You may also hear the term 'winding up' / 'wound-up' when your company goes into liquidation.

What are the main forms of liquidation?

There are three forms of liquidations for insolvent companies;

1. Compulsory Liquidation

This takes place when the company is 'wound up' by a creditor or HMRC after they have failed to pay a debt of £750 or more.

2. Member's Voluntary Liquidation

This is when a company can afford their debts, however they still wish to shut their business.

3. Creditor's Voluntary Liquidation

A more popular form of liquidation, this happens when the company director(s) take action personally to liquidate their company. Voluntary liquidation offers many advantages such as;

  • Wrongful trading accusation protection
  • Personal liabilities protection
  • Court procedure avoidances
  • Alternative options
  • A peace of mind

However, although voluntary liquidation comes with its advantages it also has its disadvantages;

  • Additional costs
  • Negative brand recognition
  • Potential investigations
  • Potentially being held personally liable

What will happen to the directors?

Once a company enters liquidation, they will be appointed a liquidator - the director(s) will no longer have control of the company or any of the assets, they will also no longer be allowed to act for or on behalf of the company.

If you are the director(s) of the company, you must ensure;

  • The liquidator has access to any information they require regarding the company
  • You have handed over all company assets, records and paperwork
  • Take part in an interview conducted by the liquidator

Once you have filed for liquidation you can be banned from being a director for 2 to 15 years. If the liquidator believes the conduct was unfit you may be prosecuted.


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