How do I liquidate my company?

If, as a director, you decide that the company can no longer meet its liabilities and so cannot continue to trade, you have several options. One is a creditors' voluntary liquidation (CVL), the most common form of liquidation in England and Wales. Whenever you find yourself weighing your options, take the specialist advice of a licensed insolvency practitioner (IP) first.

Deciding on a CVL and stopping trading

Once, having taken the advice of an IP, you believe a CVL is the right route, the directors resolve to wind the company up, propose a chosen IP to act as liquidator, and call a meeting of the shareholders. At that stage, and often even before, the company should cease trading so that no further debts are incurred, and all assets should be safeguarded.

Preparing the report and statement of affairs

The IP works with you to prepare a formal report and a statement of affairs for the company. These are presented to creditors. The IP then convenes a meeting of creditors to confirm the liquidation, and at that point takes over contact with the creditors. That step alone releases you from much of the stress of dealing with creditors and lets you start planning for the future.

The two meetings that confirm the liquidation

There are two meetings. First, the shareholders' meeting resolves to wind the company up and appoint a liquidator. In normal circumstances the meeting of creditors is held immediately afterwards. A director needs to attend and chair the meeting, but the IP is there to assist and, in effect, to run it.

There is a vote at the creditors' meeting to confirm the appointment of the IP as liquidator. At that point creditors can vote to appoint a different IP as liquidator by a simple majority of over 50 per cent.

What the liquidator does once appointed

On confirmation of the appointment, the liquidator has a number of duties to carry out, including, but not limited to, the following.

• Safeguarding and realising the company's assets.
• Dealing with any employee claims.
• Keeping creditors informed about the progress of the liquidation and any potential dividends.
• Carrying out statutory investigations into the company's affairs and the conduct of the directors.
• Submitting a conduct report to the Insolvency Service outlining the results of those investigations.
• Agreeing creditors' claims and, where possible, paying a dividend.

Why acting early matters

If you believe a CVL may be appropriate, take advice sooner rather than later. An IP may be able to suggest a solution that turns the position around. Where that is not possible, you must not take steps that make the position of creditors worse, and early action is what prevents that.

If you think a CVL may be right for your company, call us on01625 540 744 to arrange a free, confidential, no-obligation consultation. You can also read our full guide to acreditors' voluntary liquidation, including what it costs and what it means for you as a director.