Company Liquidations

What is Company Liquidation?

Company liquidation is a legal process used to wind-up and dissolve UK companies. Liquidation is an official insolvency process used to close a limited company and settle its financial affairs. Businesses may undergo liquidation if they are financially distressed beyond rescue or no longer profitable .

A limited company can only be liquidated by a licensed insolvency practitioner (IP), who will act as the company’s liquidator and oversee the process.  Businesses in liquidation relinquish their cash reserves and other assets. Property, vehicles, equipment, etc. are then liquidated (i.e. sold) by company liquidators. The role of the liquidator is carried out by either the official receiver or a private licensed insolvency practitioner from a firm like Irwin Insolvency.

When a company has been dismantled and its financial affairs settled (a process that involves dividing funds between parties with a claim on them, such as creditors), it ceases to exist as a legal entity. Its details are then removed from – or ‘struck off’ – the Companies House register.

There are three types of company liquidation:

• Creditors’ voluntary liquidation (CVL) – director-initiated insolvent company liquidation that seeks to repay creditors
• Members’ voluntary liquidation (MVL) – director-initiated solvent company liquidation that unlocks a business’s value in a highly tax-efficient manner for shareholders
• Compulsory liquidation – court-ordered insolvent company liquidation, typically initiated by creditors

Our IPs are liquidation experts with considerable experience helping directors decide whether or not company liquidation is right for their firms, as well as overseeing businesses in liquidation. We provide comprehensive UK company liquidation services, including company liquidation advice you can trust.

If you’re considering liquidation, have received a winding-up petition or want to appoint a skilled liquidator, call Irwin Insolvency today on 0800 254 5122 for friendly, professional help.

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Key Facts about Company Liquidation

• You can’t carry out UK company liquidation by yourself. The process must be managed by company liquidators – individuals like us who are authorised to carry out this specialist work.
• According to Insolvency Service data for England and Wales, one in 189 companies experienced insolvency between late 2023 and late 2024.
• With regards to insolvent company liquidation services, creditors’ voluntary liquidations are much more common than compulsory liquidations. For example, CVLs accounted for 80% of business insolvency procedures (equivalent to 1,565 cases) across England and Wales in November 2024.
• Several thousand companies enter members’ voluntary liquidation each year. Companies House statistics show that there were 9,240 MVLs in the UK in the 2023/24 financial year.

How to Liquidate a Company

Directors seeking UK company liquidation advice from our insolvency practitioners often want to know how to place their business in creditors’ voluntary liquidation or members’ voluntary liquidation. As they’re both processes that companies enter by choice, they’re arranged in very similar ways.

1. Directors consult an insolvency specialist, such as an insolvency practitioner, to check whether or not voluntary liquidation is the best way forward.
2. After deciding to place their company in a CVL or MVL, the directors work with their chosen IP to create a detailed picture of the business’s finances.
3. Shareholders consider this financial picture and the proposed voluntary liquidation process. If 75% (by share value) support the CVL/MVL, it can be carried out, with the IP working as liquidator.

In addition, CVLs require creditor involvement and support for the chosen liquidator.

4. The directors give up control of their firm, as businesses in liquidation are always led by company liquidators instead. Companies House is informed that a voluntary liquidation is underway, and the procedure is advertised in The Gazette, thereby becoming public knowledge.

By contrast, compulsory liquidation is usually initiated by a creditor submitting a winding-up petition to the court. A business served with such a petition has just seven working days to stop it becoming public knowledge.

To do this, the company should repay the creditor, dispute the debt or enter an alternative insolvency process. Otherwise, the court may decide the best course of action is to issue a winding-up order and appoint a liquidator, legally forcing the firm into liquidation.

Company Liquidation Process

Because we have considerable experience of providing UK company liquidation services, we have a detailed understanding of the company liquidation process.

The steps are much the same whether businesses in liquidation have entered the process by choice or after receiving a winding-up order. However, in relation to insolvent liquidations it must be said that creditors’ voluntary liquidations are less stressful and more orderly than compulsory liquidations because they aren’t forced on companies.

After taking charge of businesses in liquidation, company liquidators bring trading to an end and oversee employee redundancies. They ensure any money owed to the firms is paid. They also identify and locate all assets, have them valued and sell them.

Liquidators strive to ensure that each company liquidation procedure raises as much money as possible. While some funds cover the cost of setting up and administering liquidations, the focus is on repaying creditors during insolvent liquidations and rewarding shareholders during solvent liquidations.

Once all affairs have been brought to a satisfactory conclusion and all funds distributed, company liquidators request that Companies House erases liquidated businesses’ details from its register.

The Role of Insolvency Practitioners in Company Liquidation

As well as providing insightful, reliable UK company liquidation advice, Irwin Insolvency’s insolvency practitioners perform vital, wide-ranging work as company liquidators.

Our company liquidation services involve:

• Helping companies to prepare for liquidation
• Managing the entire process
• Ensuring legal compliance
• Settling legal disputes
• Acting as the main point of contact for directors, shareholders, creditors, etc.
• Assisting employees with redundancy claims
• Arranging the valuation and sale of assets
• Distributing funds fairly and proportionally
• Investigating/interviewing directors of businesses in liquidation
• Liaising with the relevant authorities, including Companies House
• Paying liquidation expenses and final VAT bills
• Ensuring liquidated businesses are dissolved

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Understanding the Different Types of Company Liquidation

Now we’ve discussed UK businesses in liquidation in general, let’s examine each type of liquidation in detail.

Creditors’ Voluntary Liquidation

Creditors’ voluntary liquidation (CVL) appeals to proactive directors whose companies are overwhelmed with debt and have no realistic prospect of recovery. By choosing to place your insolvent business in a CVL, you can ensure it’s liquidated in as smooth a manner as possible.

If you’re considering creditors’ voluntary liquidation, you should obtain company liquidation advice from a trustworthy source such as our insolvency practitioners. You need to be certain the business is insolvent and other insolvency procedures are unsuitable, so expert guidance can be incredibly helpful. We can also arrange and manage the CVL.

What Does a CVL Involve?

You’ll work closely with your chosen IP to produce a detailed overview of the business’s financial position and liquidation plans. As part of our company liquidation services, we’ll ensure these documents present a compelling case for the CVL, so that there’s every chance of sufficient shareholders (i.e. 75% by share value) voting in favour of it and the appointment of your chosen IP as liquidator.

We’ll also deal with creditors, whose involvement is crucial too; the documents have a key role to play in persuading the majority to approve the CVL and liquidator’s appointment so that the procedure can get underway as planned.

Company liquidators overseeing creditors’ voluntary liquidations must put creditors’ interests first by concentrating on clearing debts with funds raised from the sale of assets. When a business has been liquidated, remaining debt is written off.

How Are Companies Affected by CVLs?

CVLs mean companies are dismantled and dissolved, directors aren’t in charge anymore and employees are made redundant (they can claim redundancy payments from the government).

In each case, the liquidator investigates the directors’ conduct to determine whether or not it contributed to the business’s downfall. Penalties for misconduct include fines, liability for business debt, long-term disqualification from directorships and imprisonment. Choosing creditors’ voluntary liquidation counts in your favour as it shows you take your responsibilities seriously. It can therefore protect your reputation.

A CVL typically lasts between six months and several years depending on the complexity of the business’s affairs. Ultimately, the process is an effective way to give insolvent businesses in liquidation a dignified end.

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Members’ Voluntary Liquidation

Members’ voluntary liquidation (MVL) is the only form of solvent company liquidation. It’s carried out primarily for the benefit of members (i.e. shareholders). If your business is financially stable but you don’t wish it to continue (perhaps you’re keen to retire or fund a new venture), choosing to place it in an MVL could be a sensible move.

Members’ voluntary liquidations release the funds tied up in solvent companies and reward shareholders in a highly tax-efficient way. MVL funds are classed as capital instead of income, even if they exceed the normal capital distributions limit of £25,000, and therefore get taxed at a lower rate. This can be as low as 10%, thanks to Business Asset Disposal Relief (BADR).

If you’re interested in setting up an MVL, our experts can provide the company liquidation advice you need. We can confirm the business is solvent, check there are no financial/legal obstacles standing in your way and arrange and manage the liquidation.

What Do MVLs Involve?

As with a CVL, an MVL involves working closely with your chosen IP to create a clear picture of your company’s finances and a persuasive proposal for voluntary liquidation.

In addition, you must make a Declaration of Solvency to confirm your business can repay its debts within 12 months. Our company liquidation services help directors to assess their businesses’ financial health to ensure they can confidently make this legally binding declaration.

Although creditors need to be made aware of the MVL, shareholders are the focus of this type of company liquidation. We’ll strive to ensure at least 75% (by share value) vote for the liquidation and appointment of your chosen IP as liquidator so that the MVL can proceed as planned.

MVLs unfold in a very similar way to CVLs, with the business’s affairs being settled and assets sold. The key difference is funds largely go to shareholders.

How Are Companies Affected by MVLs?

MVLs mean companies are dismantled and dissolved, directors give up control and employees lose their jobs (though firms should fulfil their financial obligations to them).

Directors attend interviews with company liquidators about events leading up to liquidation, but they aren’t investigated as they would be during CVLs, as their businesses haven’t failed.

An MVL can usually be completed in six to twelve months. This type of company liquidation enables redundant solvent businesses to reach a dignified end and leads to significant tax savings for shareholders.

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Compulsory Liquidation

Like a CVL, compulsory liquidation is used to shut down insolvent companies. However, it differs from voluntary company liquidation because it tends to be the result of legal action taken by a disgruntled creditor and may go against the will of directors.

A creditor who files a winding-up petition must be owed £750 or more and have had no success recovering the money by less drastic means. Essentially, the creditor asks the court to forcibly liquidate the company: the ultimate penalty for businesses that neglect financial obligations. The court can issue a winding-up order if it’s satisfied the firm is insolvent and the debt remains unpaid.

If your business is served with a winding-up petition and therefore has only a small window of opportunity to address the debt and avoid a winding-up order, we urge you to obtain company liquidation advice as a priority. We have the expertise to assess the situation and, if at all possible, prevent compulsory liquidation (by arranging a formal repayment plan, for example).

What Does Compulsory Liquidation Involve?

The compulsory liquidation process closely resembles a CVL, except it’s usually more gruelling as directors have no control over when it begins or the selection of a liquidator.

During compulsory liquidations, company liquidators sell assets with the primary aim of repaying creditors, just like they do during creditors’ voluntary liquidations. As is the case with any type of company liquidation, directors may be required to assist the liquidators with the compulsory liquidation process. But they won’t have had the chance to build up close working relationships with them beforehand, unlike directors of firms entering voluntary liquidation, and this may make the process more challenging.

How Are Companies Affected by Compulsory Liquidation?

Compulsory liquidation means companies are dismantled and dissolved, directors aren’t in charge anymore and the workforce is made redundant (but can claim redundancy payments from the government).

Directors’ conduct is investigated as it would be during a CVL, except it’s the official receiver who carries out the investigations instead of insolvency practitioners working as company liquidators. The same penalties for misconduct outlined earlier apply. Being forced into liquidation reflects badly on directors, as it doesn’t demonstrate a proactive approach to tackling debt.

Compulsory liquidation typically takes from six months to several years depending on the complexity of the company’s affairs. Because the procedure forcibly shuts down an insolvent business, it gives the firm a far less dignified end than a CVL.

How Much Does It Cost to Liquidate a Company?

The cost of UK company liquidation services is calculated on a case-by-case basis. It takes into account the amount of specialist work completed by company liquidators, as well as administrative expenses (such as fees for advertising liquidations in The Gazette). Businesses in liquidation are incredibly diverse, so some cases are more complex, time-consuming and costly than others.

Voluntary Liquidation

The company being liquidated normally covers the cost of arranging and carrying out voluntary liquidation, using funds raised by selling assets.

·       A CVL for a small insolvent company with few creditors and assets is likely to cost £4,000-£6,000 + VAT.

·       An MVL for a similar solvent company typically costs less: £1,000-£5,000 + VAT.

MVLs are generally more inexpensive than CVLs because solvent companies’ finances are in better order and the company liquidators don’t have to spend as much time dealing with creditors.

Compulsory Liquidation

The person/organisation submitting the winding-up petition covers the cost of arranging compulsory liquidation (though they may be reimbursed by the company if enough funds become available when it’s being liquidated). The petition fee is £2,600 and court fee is £332.

The cost of carrying out compulsory liquidations is covered by the businesses in liquidation, with funds being drawn from the sale of assets.

Company Liquidation FAQs

Are directors required to repay company debts during UK company liquidation?

Normally, directors of businesses in liquidation aren’t liable for company debts. But there are two situations in which they may become liable:

·       They’ve personally guaranteed company borrowing.

·       Or conduct investigations reveal they’ve engaged in wrongful/fraudulent trading.

When providing company liquidation advice, we can check whether or not the procedure is likely to affect your personal financial position.

How do company liquidators decide which creditors to repay first?

Under UK law, creditors must be repaid in a specific order:

1. Secured creditors, e.g. banks

2. Preferential creditors, e.g. employees

3. Unsecured creditors, e.g. suppliers

Can HMRC pursue businesses in liquidation for taxes?

Yes – HMRC is a preferential creditor in relation to debts such as VAT and employee National Insurance Contributions.

Once firms have been dissolved, HMRC can still pursue unpaid taxes for up to six years – or up to 20 if it believes a business acted wrongfully.

Is liquidation the best option for my company?

• If you want to shut down a solvent company that has considerable resources, an MVL could well be the best, most tax-efficient option.
• If you’re the director of an insolvent company, a CVL is likely to be a better, less damaging option than compulsory liquidation.

However, alternatives to company liquidation can work well for some companies, so it’s crucial to obtain company liquidation advice based on your business’s specific circumstances before committing to a particular course of action.

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Alternatives to Company Liquidation

If your company is overburdened with debt, you might assume insolvent company liquidation services are your only option. But we encourage you to consult our insolvency practitioners, who can tell you if the business remains viable and could therefore potentially be rescued instead of liquidated.

The main alternatives to insolvent company liquidation are:

• Corporate reconstruction – an IP streamlines a business’s structure and operations to help it improve its cash flow and profits and avoid insolvency.
• Company voluntary arrangement – this long-term, affordable repayment plan is arranged and managed by an IP. CVAs give insolvent businesses the chance to trade their way out of debt and become successful again.
• Company administration – an IP temporarily takes charge of an insolvent business and makes it more efficient. The key aims are to return the firm to profitability and repay creditors.

With regards to solvent companies, the only alternative to an MVL is voluntary strike-off. You submit an application to Companies House and pay a nominal fee.

Voluntary strike-off only takes a few months. However, it doesn’t offer special tax savings and means directors are responsible for legal compliance.

Expert UK Company Liquidation Advice from Irwin Insolvency

Whether you need help and support in relation to CVLs, MVLs or compulsory liquidation, you can rely on our skilled insolvency practitioners’ company liquidation services.

We’ve been empowering directors to make the right decisions about their companies’ future for over 25 years.

For expert company liquidation advice, starting with a free, no-obligation consultation, contact the insolvency professionals at Irwin Insolvency today.

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Learn more about Company Liquidations:

Step-By-Step Guide to the Liquidation Process

Types of Liquidation

What Happens When A Company Goes Into Liquidation?

How Long Can Companies Stay In Liquidation?

What Happens to Employees When a Company Goes into Liquidation?

What Happens to a Director of a Company in Liquidation?