How to Liquidate a Company and Can I Do It Myself?

Whether a company is solvent or insolvent, it is not possible to liquidate a company yourself. Any company liquidation must be handled by a licensed insolvency practitioner (IP). 

Unless the company has been issued with a winding up petition by a creditor, the directors of the company make the decision to liquidate it and instruct an IP. So, let’s look at how to liquidate a company.

Types of company liquidation

There are three types of company liquidation in the UK:

  • Compulsory liquidation
  • Creditors’ Voluntary Liquidation
  • Members’ Voluntary Liquidation

With a compulsory liquidation, an insolvent company has been forced to liquidate by their creditors. In a Creditors’ Voluntary Liquidation (CVL), the directors have made the conscious decision to liquidate an insolvent company. For a Members’ Voluntary Liquidation (MVL), the directors have made the decision to close a solvent company.


Can I liquidate a company myself?

In the UK, you are not allowed to liquidate a company yourself. Therefore it is important that you understand exactly how to liquidate a company. It must be handled by a licensed insolvency practitioner. Should a director try to liquidate a company, there will be an investigation by the IP. Fraudulent or wrongful trading may be considered to have taken place and the director could face the situation whereby they may not be allowed to act as a director for any company in the future. In serious situations, they may end up with a criminal record.

Steps to liquidating an insolvent or solvent company

If a company has failed the balance sheet test or cash flow test, they are considered insolvent. In some cases, the company may go into administration whilst a possible business rescue solution is considered. However, in most cases, an IP is appointed to handle the liquidation process on behalf of the insolvent company’s creditors.

The IP, or liquidator, sells off any assets at market value to realise revenue, which is then distributed to the creditors in a priority order, as set out by the Insolvency Act 1986. Once this has been completed, the insolvent company is struck off the Companies House register and no longer exists. Read more....

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