Liquidation

Liquidation is a formal insolvency process which brings a business to a close.

It can be used when a company is no longer solvent, or when it has ceased trading but does not have sufficient assets or funds to meet it’s commitments.

A Liquidator is appointed and the companies assets are sold to pay the company liabilities. Where there is insufficient value to pay the liabilities in full the balance is written off. When the liquidation concludes the company is struck off Companies House register.

A Liquidator can also be appointed when you wish to officially close a company and there are reserves built up that need to be returned to the shareholders. This is referred to as a Members Voluntary Liquidation (MVL).

Benefits

  • Any outstanding debts are written off
  • Legal action for recovery is halted
  • Employees can claim redundancy and notice pay from the government
  • There is no requirement to continue leases
  • Doesn’t need to involve courts/legal action
  • In an MVL surplus funds are paid to the shareholders who pay capital gains tax on these funds rather than income tax

Considerations

  • Doesn’t remove requirement to act responsibly or any personal obligations
  • Personal guarantees remain collectible
  • Control of company assets passes to the Liquidator
  • Future trading required under a separate entity and there may be restrictions