Voluntary Liquidation

With Voluntary Liquidation you close the business and start again. Put available resources into a new company rather than struggling to pay legacy debts.

• Legacy debt written off
• Directors maintain control of the closure process
• Resources can be put into a new company

If your company has serious financial difficulties, controlled closure of the business might be the right option -
find out if voluntary liquidation is right for your company

Where to start

• Check if you qualify – use the Solution Calculator to get a FREE REPORT
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What happens to Directors

Take control of the closure process

If directors face their company being compulsorily wound up, the disadvantage they have is that they are not in control of the process. A liquidator will be appointed by the court who will not prioritise the interest of the directors.

If the directors make the decision to close the company themselves, they have far more control over the appointment of the liquidator which may help when an investigation of the director's activities is undertaken.

Start a new business

The directors are able to set up a new company which can begin to trade in the gap left by the old business. As such, they can start trading again quickly once the old company is closed.

Directors' disqualification report

When the old company is closed, the liquidator will have an obligation to undertake a disqualification report on each of the directors.

This is a standard procedure after a company is liquidated and ensures that the directors are not responsible for wrongful trading (trading the company while knowingly insolvent).

If the company has been compulsorily would up, the court appointed liquidator may look for reasons why the directors could be accused of wrongful trading and therefore be held personally liable for the repayment of the company's debts.

In a voluntary liquidation, the directors will have the opportunity to appoint a liquidator. It is less likely to be accused of wrongful trading when the directors have initiated the closure of the company themselves.

What happens to Employees

Move to new business

If the directors of the company intend to start a new business, it is highly likely that they will want employees of the old company to move with them. However, the offer of new employment will not be guaranteed.

Employees will be made redundant from the old company by the liquidator. It is unlikely that employees will receive sizable redundancy packages as the business is insolvent and will not be able to afford to pay these.

What happens to Creditors

Likely to receive little or no return

If a business is insolvent when it is closed, creditors are likely to get very little return. The liquidator will sell any company assets for the benefit of the creditors. However if these are few, then there is likely to be very little return.

Can influence the appointment of the liquidator

Creditors will be given the opportunity to approve the liquidator at a creditors meeting (commonly known as the Section 98 meeting). They may reject the recommendation made by the company directors and vote to introduce their own liquidator.

This situation is unusual unless there a major creditor such as a bank wishes to appoint a liquidator from their own recommended panel.

What will Voluntary Liquidation cost?

The cost of liquidating a company is normally around £5000.

This money can be paid by the company if there is sufficient cash available, or due to be collected from debtors. Alternatively the fee could be met from the sale of company assets.

Where the company is unable to pay for its liquidation, this would have to be paid personally by the company directors or shareholders.

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