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Company Liquidation FAQs
What is a Company liquidation?
A Company Liquidation (CVL) is the most common liquidation process for companies that are experiencing financial difficulty from which they cannot recover. If a company cannot pay its creditors (debts), doesn’t have enough funds to continue to operate, and is not able to benefit from a Turnaround & Rescue or administration procedure, the company can be placed into liquidation.
Once it is clear that there is no reasonable prospect of a company avoiding closure, company directors must take steps to ensure that the company is not continuing to trade.
How do I place my Company into liquidation?
Company liquidation can only be created under the assistance of a licensed Insolvency Practitioner (IP). An IP will be able to help you with good advice that you need to sort out your financial situation.
An Insolvency Practitioner will be able to give you the sound, practical advice you need when dealing with a distressed company and you are highly encouraged to speak to one at the earliest signs of insolvency. They will be able to discuss the various options available to you and your company which may involve rescue and restructuring procedures – live chat online now
How can Liquidation benefit my business?
Liquidation allows you to close a business and deal with all outstanding company debts through the process. The value of assets will be maximised to provide a substantial return to creditors and, while not all amounts will be able to be returned to creditors, the majority of the debt should be dealt with.
How much doers a liquidation cost?
It takes 14 days to put a company into a CVL, the date is agreed upon in advance. If 90% of shareholders agree to short notice, liquidation can happen in half of that time (7 days). 7 days is the minimum statutory notice period to creditors.
How long does it take to put a company into liquidation
The fees can vary depending on the circumstances of the business. These circumstances could be related to the level of its debt, the number of shareholders that it has, or the cost of the assets that it has left.
It’s important when getting advice to understand the difference between licensed and unlicensed advisors. Unlicensed advisors will act as an unnecessary middle-man between you and a licensed practitioner. This will add unnecessary money and time to the process.
Business Helpline is a fully licensed insolvec=ncy practice therefore we will deal with you directly.
Why should I go into a CVL?
Directors of insolvent companies have legal responsibilities to fill. A key obligation, once you know that your business is in an insolvent position, is to prioritise the needs of your creditors above everybody else. This means putting those who you owe money ahead of fellow directors and shareholders.
This means you should not be getting involved in anything that could worsen the position of your creditors. You must avoid adding to their financial losses. That means you must stop trading straight away because this could affect the position of your creditor in a negative sense. However, there are some ways that a company could continue to trade as an insolvent company, if you are able to prove that your work would be of benefit to creditors. This can be rather complex, though, so it makes sense to cross-check any scenario like this with a qualified insolvency practitioner.
Putting your company into a CVL one you know that it’s insolvent is illustrating your desire to protect those creditors. This is good as it shows you are acting as you should according to your legal duties.
Placing a struggling company into liquidation can also be a massive relief. If you have been dealing with angry creditors and customers worried about their future then this could be the best solution for you. After going into a CVL, any unpaid debt, that isn’t personally guaranteed, will be written off. Creditors will no longer be able to chase you personally for outstanding money. Upon entering a CVL, employees will also be allowed to receive redundancy pay – if they qualify for it.
What is the difference between liquidation and administration?
While they do have similarities but liquidation and administration are NOT the same thing; they are two separate and distinct insolvency processes. Liquidation through a CVL creates the end of an insolvent company, however, the administration offers a chance of rescuing the business through restructuring and refinance.
Companies can be put into administration if there is a fair chance that the business – or sections of the business – can be rescued, or if an MVL looks like being a better solution for creditors than a CVL.
Administrations can provide a level of protection for a company that is distressed and faces the possibility of facing legal threats from frustrated creditors. A company is granted a moratorium when it enters administration, bringing any ongoing litigation to a halt while preventing any new legal action from being undertaken. At this moment, the appointed administrator should be a licensed insolvency practitioner, who will work to restructure the business in the best possible way – allowing it to continue trading.
It’s worth noting that administration is not a long-term position for a company to be in; it will have to exit administration at some stage. This could be through a sale, a continuation of trade, or through a different insolvency process. That process could be a CVL or a CVA if the business cannot be saved from its plight.
What comes after the CVL?
Following completion of the Creditors Voluntary Liquidation, the company will cease to exist as it will have been struck off the Company House register. Unpaid liabilities will be written off unless they were personally guaranteed.
Throughout liquidation, the liquidator must investigate any actions taken by directors and former directors within the last three years. If they do not do this properly, they could be found guilty of wrongful trading, fraud, or misfeasance. Such an act could result in directors being made personally liable for some or all of the company’s debts; they might also be disqualified from being the director of any company for up to 15 years. Nonetheless, such instances are very rare and directors are usually able to move on to a new business venture if they wish to do that.
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