Company liquidation is an extremely difficult prospect to face for anyone in business, from employees right up to company directors and owners. Regardless of the size of the firm, for many people liquidation carries the stigma of failure, and is something most business owners would rather not have to face.

However, if a company has become insolvent and is unable to pay its debts, the worst thing that can possibly be done is to ignore the firm’s financial problems and try to sweep them under the carpet.

Facing up to business debts and cash flow problems can be the first step towards resolving them. But, if the worst comes to the worst and the business is no longer a viable concern, then liquidation may be the best solution for everyone.


Under UK law, there are three different forms of company liquidation. Two of these are voluntary processes, the other is compulsory. Members’ Voluntary Liquidation, which is sometimes referred to as ‘solvent liquidation’, can take place when a business is still solvent, but the company shareholders agree in a general meeting to wind up the company.

To proceed, the majority of the business’s directors must make a statutory declaration of solvency — that is, that the company will be capable of repaying any outstanding debts within one year.

If the firm is insolvent and would be unable to repay its debts within 12 months, the shareholders can vote to allow the business to go through Creditors’ Voluntary Liquidation (CVA).

This company must pass a special resolution under the Companies Act 2006 declaring that it is unable to continue in business due to its debts and liabilities. A meeting of the company’s creditors takes place within 14 days, during which the business’s finances will be reviewed, and a liquidator subsequently appointed.

Compulsory liquidation occurs when a company is ordered to be wound up by a court order. This usually happens when a creditor to whom the business owes an unpaid debt raises a petition with the appropriate court. On the issue of the court order, the Official Receiver is appointed as liquidator, and the company liquidation process begins.


Although liquidation follows a broadly similar process across the UK and Northern Ireland, it’s important to understand that the different legal systems mean that the procedure in Scotland and Northern Ireland will differ from company liquidation in England and Wales.

Although there is no central company liquidation register as such, the live register of businesses at Companies House is updated to indicate when a firm is in liquidation. Unless a court (for voluntary liquidation) or the secretary of state (for compulsory liquidation) grants an application for deferment, the company is considered dissolved three months after liquidation is concluded, at which time the firm is removed from the live Register at Companies House.

If your company is facing liquidation, either voluntary or compulsory, remember that it’s not something you have to deal with alone, and that there are many sources of information and advice on company liquidation to help you through the process.


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