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Company voluntary liquidation

If your business is suffering financial distress, you may wish to use a creditors’ voluntary liquidation (also known as ‘CVL’) to shut down your business and end trading. 

Unlike compulsory liquidations a CVL is initiated by company directors and provides more control over the closing down process for the directors and shareholders+.

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Last Updated: 16/12/2024

How do I liquidate a company?

Your company is technically insolvent if it cannot pay its creditors as they fall due such as Coronavirus Business Interruption Loan Scheme (‘CBILS’) or Bounce Bank Loan repayments (‘BBL’) or if its liabilities are more than its assets.

If your company is insolvent one option is a creditors’ voluntary liquidation which effectively ends your responsibilities as a director and uses the company’s remaining assets to pay off your creditors.  However, before implementing a creditors’ voluntary liquidation we will first explore all the options to recover your business.

Our expertise in business turnaround can help recover the business if you act quickly.  See our top 10 frequently asked questions on creditors’ voluntary liquidation.  There may be better options if your company is under threat of liquidation.

Before considering closing down your company talk to us to understand your choices and for a professional assessment of your situation, call us.

What happens when a company goes into liquidation?

At McTear Williams & Wood we follow a proven step-by-step procedure to manage the liquidation of your company quickly and efficiently during a creditors’ voluntary liquidation.

  • Appointment and assessment – in the first instance you will work with one of our directors or associate directors to understand the
    challenges of your current financial situation.
  • Business rescue evaluation – if we think your company can be saved we will help you do that.  If not we will explore with you whether the business can survive in some form.
  • Extraordinary general meeting – should the company need to be wound up a meeting of the creditors is called to begin the formal process of winding down the business.
  • Function as liquidator – finally we can take an appointment as a liquidator to arrange a fast and efficient sale of your assets and business.

Did you know directors are legally permitted to buy back their business and assets in creditors’ voluntary liquidation?  Should you wish we are able to provide you with advice and support on how to purchase your business after a CVL and start trading again.

Director

Is liquidation the right option for you?

Check the health of your business with our free business health check tool.  Get an indication as to whether your company has what it needs to survive. Includes:

  • Company health assessment.
  • Types of liquidation that might be available.
  • Options & next steps.
All informaton provided will remmain completely confidential and will not be shared with a third party.

How to close a business

Use a creditors’ voluntary liquidation (“CVL”), a formal insolvency process to close a limited company which is insolvent. This process involves:

  1.  Appointing an insolvency practitioner, who will manage the company’s affairs.
  2. Realising the company’s assets – once identified the company’s assets will be sold.
  3. Repaying creditors out of proceeds from the sale of company assets.
  4. Closing the company – the insolvency practitioner will ensure the company is closed down properly and dissolved at Companies House.

Why should I consider company voluntary liquidation?

Creditors’ voluntary liquidation (‘CVL’) occurs when directors and shareholders agree to place the company into liquidation because it can no
longer pay its debts and this is the most typical form of liquidation.  There are several reasons for and against this form of liquidation but you may wish to consider CVL for the following reasons.

Outstanding debts are written off

If your business is unable to pay its creditors and there are no viable plans to turn the company around it cannot continue trading, then a CVL is generally considered the best way to end trading and tidy up the company’s affairs.  Unless you have given personal guarantees, which make you personally liable for the company’s debts you have no legal liability to repay the debt owed by the business.  This can include any loan taken out by the business such as a Bounce Back Loan or Coronavirus Business Interruption Loans (CBILS).

Staff can claim redundancy pay

There is some good news.  If you’re wondering what happens to employees when your company goes into liquidation whilst they will be made redundant by the liquidator, they may be able to claim redundancy pay and any other statutory entitlements fromthe Government.  This includes the directors (although their claims face more hurdles).   We guide all directors and employees through every step of the claims process.

Any legal action is parked

Any legal action that your company faces is usually halted once the company enters liquidation.

Relatively low costs

Some Insolvency firms ask to be paid up front (sometimes by the dierctors personally) for the initial CVL work but we don’t.  Any professional fees such as fees as an insolvency practitioner are paid from the sale proceeds of the company’s assets.

Avoiding court proceedings

By voluntarily deciding to liquidate your company you can avoid creditors petitioning to wind up your company through the courts which
can take many months.

Cashflow problems

Cashflow problems can lead to insolvency, when a company is unable to meet its financial obligations. Common cashflow problems that can lead to insolvency might include:

  1. Late payments – a sign a company is struggling to pay its bills on time which can also damage a company’s credit score.
  2. Excessive debt – large debts that cannot be serviced causing loans to be called in.
  3. Inefficient management – poor cashflow management can cause financial problems for businesses.

Other cashflow problems can include: failed investments, excess inventory, lack of cash reserves, low profit margins, seasonal variations, poor credit control, declining sales, high overheads and expensive credit terms.

BUSINESS RESCUE & INSOLVENCY SPECIALISTS

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What are the negative consequences of company liquidation?

Although CVL’s generally run smoothly there are some potential pitfalls that you need to be aware of along the way and these might include the following.

Wrongful trading accusations

Once appointed your appointed insolvency practitioner is obliged to investigate the conduct of all directors.  When BBLs and CBILS are
involved this includes the eligibility for and the use of these funds.  In extreme cases actions for wrongful trading and other claims can be
brought against the directors, then you could face serious consequences such as a director ban or even prosecution.  If you have taken and followed professional advice this is much less likely.

Personal liability for company debt

If you’ve given a personal guarantee to a lender of any kind then you could wind up being personally liable for the business debt.   If an agreement cannot be reached to satisfy the debt then it is a creditor’s right to enforce this guarantee should they wish.  This will also apply if you gave a personal guarantee to the lender for a CBIL too.

All business assets will be sold

Any asset belonging to the business must be sold off to provide funds to creditors where possible to do so.

Free advice line for distressed company directors > 08003317417

How long does it take to liquidate a company?

There are several steps that need to be taken during any type of liquidation and it’s important to consider that these steps may take longer
than you think:

  • Appointing a liquidator make take around 2-4 weeks. However, liquidation can sometimes begin in as little as a week should 90% of
    your shareholders agreed to such short notice.
  • Once the liquidator is appointed they must sell the business assets, perform investigations and file all the necessary paperwork.
  • A straightforward liquidation can take six months from start to finish.

How much does it cost to liquidate a company?

Usually at least several thousand pounds – but the directors and shareholders should not pay this personally. The cost gets paid from the
company’s assets.

Director redundancy

A director is always an office holder but may also be classed as an employee of the business and may be entitled to payment from the Redundancy Payments Service (“RPS”) for redundancy and other claims such as pay in lieu of notice, arrears of wages and holiday pay once the company enters into a formal insolvency process. To qualify the director must:

1. Have a formal contract of employment.
2. Have worked for the company for at least two years to qualify for redundancy pay.
3. Have been paid at least the National Minimum Wage.
4. Have worked at least 16 hours per week and been paid a salary via PAYE.
5. Have had a useful and ongoing role in the running of the company.
6. Not have an overdrawn director’s loan account owed to the company prior to the insolvency process.

If eligible the director may receive up to eight weeks of unpaid wages, six weeks of holiday pay, notice pay equivalent to one week’s notice for each fully year of employment and if he/she has more than 2 year’s service redundancy pay of up to one and a half weeks for each year of service.

FAQ's

How do I shut down my business?

If your company is insolvent and cannot afford to repay its debts the correct course of action to achieve company closure is to opt for a formal insolvency process such as a creditors’ voluntary liquidation, this will enable you to effectively shut down an insolvent business. An insolvency practitioner will be appointed to liquidate the company and realise the assets and use the proceeds of these sales to repay the company’s creditors. Proper management of assets and debts is important to avoid legal disputes with creditors.

How can we help - Book a free 1-2-1

If your company is struggling with unmanageable debts, decreased cashflow or concerns about about your company’s future, we can assess your situation and provide you with tailored solutions and options.

During your free initial advice meeting, we will discover a true picture of your company’s financial situation
and offer practical and expert guidance on your next steps.

Initial meetings can be held at our office or your premises and are completely confidential.

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There is no charge for this meeting – charges only apply if and when terms of engagement have been agreed.

Avoid insolvency by recognising and identifying the early warning signs.
Do you have a large quantity of your money tied up in your company? We can assist you in getting your hands on this amount, tax efficiently using a solvent liquidation process (or MVL). Getting money from your company at 10% tax is easier than you expect.
There may be better options if your company is under threat of liquidation. Before you consider closing down your company talk to McTear Williams & Wood to understand your choices.
Even if your business has received a winding up order we can still help you effectively realise your business assets to achieve the best outcome. Find out your options call us on 0800 331 7417.
Act now and save your business. Are your creditors trying to close your business? McTear Williams & Wood can help you get your business and finances back on track. Discover all the options available to you and call us now.
Get advice on how to avoid disqualification as a director. Ensure your actions remain lawful if your company is insolvent with expert advice from McTear Williams & Wood.
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