Closing a business is never an easy choice. Whether you’re struggling with debts, dealing with cash flow issues, or simply want to close a company that has run its course, understanding the company liquidation process is essential. At Campbell Crossly & Davis, we are licensed insolvency practitioners with years of experience supporting company directors through this journey.
In this guide, we explain the different types of liquidation, what steps are involved, what directors need to do, and what happens once the process is complete. Whether your limited company is solvent or insolvent, we aim to give you clear, practical advice every step of the way.
What Does It Mean to Liquidate a Company?
To liquidate a company means to close it down in a formal, legal way. The business stops trading, its company assets are sold, and the money is used to pay off debts. Any remaining funds, if there are any, go to shareholders. After this, the company is removed from Companies House and no longer exists as a legal entity.
There are different ways to liquidate a company, depending on your situation. Some companies are closed voluntarily, while others are forced to close by their creditors. No matter how it happens, liquidation brings the business to an official end.
The Main Types of Liquidation
In the UK, there are three main types of liquidation. Which one you use depends on whether your company can pay its debts or not.
Members’ Voluntary Liquidation (MVL)
If your company is still able to pay everything it owes, you can choose a members’ voluntary liquidation. This option is often used when directors want to retire, restructure, or simply wind down the company for personal reasons. To start an MVL, directors must confirm the company is solvent and can pay all debts within 12 months.
Creditors’ Voluntary Liquidation (CVL)
If your company is insolvent — meaning it can’t pay its bills when they’re due — a creditors’ voluntary liquidation may be the best option. Directors begin the process by choosing a licensed insolvency practitioner, who then takes control. Their job is to sell company assets and repay creditors as much as possible.
Compulsory Liquidation
In this case, a creditor asks the court to close your company, usually after trying to collect unpaid debts. If the court agrees, it issues a winding up order, and the liquidation begins. This route starts with a winding up petition and is often used when other recovery methods have failed.
Step-by-Step: How the Liquidation Process Works
The exact steps can vary depending on the type of liquidation, but most follow a similar path.
Step 1: Realising There’s a Problem
It usually starts when the directors notice ongoing financial trouble — maybe missed payments, pressure from suppliers, or falling behind with tax bills. If your company is insolvent, you must act quickly. Continuing to trade can lead to personal consequences if it causes further losses for creditors.
Step 2: Getting Expert Advice
The next step is to speak with an insolvency practitioner. At Campbell Crossly & Davis, we offer expert advice to help you understand your options, including liquidation, rescue plans, or informal solutions. Acting early gives you more control and can help protect you from personal liability.
Step 3: Deciding on the Right Type of Liquidation
If liquidation is the right choice, we’ll help you work out which process to follow. A members’ voluntary liquidation (MVL) is only suitable if the business is solvent. Otherwise, a CVL or compulsory liquidation will be necessary.
Step 4: Shareholder and Creditor Meetings
For voluntary liquidation, the company’s shareholders must agree to close the company. In most cases, 75% must vote in favour. Creditors are also notified and may hold a meeting to approve the appointment of the insolvency practitioner and to review the company’s financial position.
Step 5: Appointing a Liquidator
Once appointed, the liquidator takes over. Directors no longer have control of the business. The liquidator handles all aspects of the process, including dealing with creditors, selling company assets, and submitting reports to Companies House and the Insolvency Service.
Step 6: Selling the Company’s Assets
The liquidator identifies everything the company owns — such as equipment, vehicles, stock, or property — and arranges for these assets to be sold. This may also include collecting outstanding payments owed to the company.
Step 7: Paying Creditors in the Right Order
Once money is raised, it is used to pay off debts in a specific order, as set out in the Insolvency Act. Costs of the liquidation come first, followed by:
- Secured creditors with a fixed charge
- Preferential creditors (such as employees owed wages)
- Creditors with floating charges
- Unsecured creditors (like suppliers and contractors)
If there’s anything left after all creditors are paid, it goes to the shareholders.
Step 8: Director Investigations
During liquidation, the liquidator will check the directors’ actions leading up to the company’s insolvency. If you’ve done your best to act in the interests of creditors, there is usually nothing to worry about. However, if there are concerns about wrongful trading or misuse of company funds, this could lead to further action.
Step 9: Closing the Company
Once everything is dealt with, the company is officially removed from Companies House. This means it no longer exists and cannot trade. This is the final step of the liquidation process.
What Are Directors Responsible For?
When a company is in financial difficulty, directors have a duty to protect creditors — not shareholders. You must stop trading and avoid doing anything that could make the situation worse.
You should:
- Keep accurate and up-to-date records
- Hand over company books and accounts
- Be open and honest with the insolvency practitioner
Our role is to help you understand what’s required and to support you throughout the process.
The Liquidator’s Role
A licensed insolvency practitioner acts as the liquidator and takes responsibility for running the liquidation. This includes:
- Advising directors on their legal duties
- Collecting and selling company assets
- Paying creditors in the correct order
- Dealing with paperwork and filing legal notices
- Investigating director conduct where needed
At Campbell Crossly & Davis, we always explain what’s happening at each stage so you’re never left in the dark.
What Happens After the Company Is Liquidated?
Once the process is complete and the company has been struck off the register, it no longer exists. Any remaining debts that couldn’t be paid are written off unless you’ve personally guaranteed them.
Most directors are free to start a new company if they wish. However, there are some rules around using the same or similar name, especially if the new business is in the same line of work. You’ll also need to notify the creditors and follow set procedures or apply to the court for permission.
If you don’t follow these rules, you could be fined or banned from acting as a director again.
How Long Does Liquidation Take?
The length of time varies depending on the size of the business, how many creditors there are, and how long it takes to sell assets.
- A simple MVL might take 4–8 weeks
- A CVL can take several months or longer
- A compulsory liquidation depends on how quickly the court moves
At Campbell Crossly & Davis, we aim to keep things moving quickly and smoothly.
What Does Liquidation Cost?
There’s no fixed cost, as it depends on the company’s size and how complex the case is. In most situations, fees can be paid from company assets. If the company has no assets, directors may need to pay for the process themselves.
We’ll always be transparent about costs upfront, and we’ll work with you to keep things affordable.
Liquidation or Strike-Off: Which Is Better?
Some directors consider striking the company off the register instead of going through liquidation. While this may be cheaper, it’s not always the right choice.
Strike-off is only suitable if:
- The company has no debts
- All creditors have been paid
- There are no ongoing legal issues
If your company is insolvent or still has assets, liquidation is usually the safer and more appropriate route. It provides legal protection and ensures everything is handled correctly.
Can You Start Again After Liquidation?
Yes, most directors can start a new business once liquidation is complete — as long as there hasn’t been any misconduct. There are rules about reusing the old company’s name, but in many cases, it’s possible to continue in the same industry with proper steps.
If you plan to reuse a similar name, speak to us first so we can help you avoid breaking the law.
Risks of Carrying On Trading When Insolvent
One of the biggest risks is continuing to run a business that is already insolvent. If you trade while knowing the company can’t pay its debts, you may be found guilty of wrongful trading.
This can lead to personal liability for the debts and even a ban on being a director in the future. If you think your company is insolvent, you must stop trading immediately and get advice.
Other Options to Liquidate a Company
Liquidation isn’t always the only answer. There are alternatives depending on your situation:
- Company Voluntary Arrangement (CVA): Set up an agreement to repay debts over time
- Administration: Protect the company while looking for a rescue plan or buyer
- Informal Settlements: Negotiate directly with creditors to avoid formal procedures
We’ll always look at every option to find the one that suits your business best.
How We Can Help at Campbell Crossly & Davis
At Campbell Crossly & Davis, we understand how stressful financial problems can be. Whether you’re closing your company, trying to rescue it, or just need advice, we’re here to help.
We’re fully licensed insolvency practitioners with the knowledge and experience to guide you through every step of the liquidation process. We’ll explain things clearly, deal with the legal side, and help you get the best possible outcome.
Need to speak to an expert about company liquidation?
We offer free, confidential advice with no obligation.Get in touch with our team today to take the first step toward resolving your situation.