Liquidate your limited company (2024)

FAQs

Why would you liquidate a company? ›

Liquidation is the process of closing a limited company, selling assets and dissolving the company from the official register. It is the process that your company faces if you have cash flow problems on a regular basis and creditors are threatening to take enforcement action.

Yes, you can wind up a company without a Liquidator. However, you cannot liquidate your company yourself. Liquidation is a formal insolvency procedure that can be applied to a solvent or insolvent company. It is a form of winding up provided in the Insolvency Act 1986.

In short yes, you can be a company director after a liquidation. You can be a director of any number of companies and if there hasn't been a case of any wrongdoing (misfeasance) in the liquidation process you are free to start another.

Once a company is dissolved, it no longer exists as a legal entity and cannot conduct business or enter into contracts. Dissolution may also trigger a number of certain legal obligations, such as the distribution of remaining assets to creditors or shareholders. It also might involve the filing of final tax returns.

Liquidating your business means all employees will lose their jobs. This can be particularly difficult if you have a loyal and close-knit workforce, making it a painful aspect of the process. Suppliers and creditors are likely to lose money, as they may not recover all amounts owed.

disadvantages to Liquidation

The business will no longer be able to trade and will likely be restricted from using the same or similar company name again in the future. Any employees will lose their jobs and so will the directors. Shareholders may have to repay illegal dividends (not paid out of profit).

Using personal funds to pay liquidation fees

If the company has insufficient assets with which to cover the liquidation fees, you may need to use personal funds to pay the professional costs incurred during the liquidation of your company.

On average, it usually costs between £2,500 and £6,000 +VAT to liquidate a company, but it can be more or less depending on the company's situation. Company liquidations have to be carried out by a licensed insolvency practitioner (IP) which is why the cost can become expensive.

If the company has assets at the point of liquidation then the costs of the liquidation will be paid from the value of these assets. But if this isn't the case, an insolvency practitioner will generally ask the directors to cover the liquidation costs so that he/she can be certain that they will be paid.

The good news, generally speaking, is that the liquidation of your company will not affect your personal credit rating.

How long does it take to liquidate a company? ›

Liquidation procedures can take anywhere from three months to a year, due to a number of factors including approving liquidation, appointing a liquidator, the sale of company assets and agreeing on creditors claims. Unfortunately, there is no legal time limit on business liquidation.

Closing a company with debts does not prevent you from starting a new company either immediately or at a future date as long as you have not been disqualified from acting as a director.

What's the most cost-effective way to liquidate a company? Voluntary liquidation, initiated by the company's directors and shareholders, can be the cheapest way to liquidate a company, subject to meeting certain criteria.

When a company enters liquidation, any assets it owns are sold by the liquidator to generate funds for creditors. Once all creditors have been repaid as far as funds allow, any remaining debts are written off.

What are the differences between liquidation and dissolution? Dissolving a company through the process of dissolution often takes place when a company is solvent, but is no longer trading. Liquidation however, occurs due to a company having financial difficulties and therefore being unable to keep up with their debts.

The liquidation of an insolvent company allows an independent registered liquidator (the liquidator) to take control of the company so its affairs can be wound up in an orderly and fair way to benefit creditors. There are two types of insolvent liquidation: creditors' voluntary liquidation. court liquidation.

Priority of claims

The main purpose of a liquidation where the company is insolvent is to collect its assets, determine the outstanding claims against the company, and satisfy those claims in the manner and order prescribed by law. The liquidator must determine the company's title to property in its possession.

Liquidation is a process by which a company's assets are sold to pay off debts to creditors, and the company is then dissolved. While it may seem like a quick solution to financial problems, it can have serious consequences for the company's directors, shareholders, and employees.

Many people, in order to remain financially stable, start selling off or liquidating their assets – particularly if their assets are outweighed by their debt. Liquidation of real estate or assets means that they are converted to cash.