Can I Liquidate My Company Myself?
Liquidation, also known as ‘winding up’, formally brings an end to the operations of a company. The company will cease trading; all employees will be made redundant and its assets (if any) are realised to pay the costs of the Liquidation and then distributed to its creditors. The Liquidation is then closed and the company dissolved (‘struck off’) at Companies House.
Directors can propose that a company stops trading and be liquidated, however they cannot voluntarily liquidate the company on their own, an authorised insolvency practitioner must be appointed to act as liquidator.
There are three types of liquidation,
- Compulsory Liquidation
- Creditors’ Voluntary Liquidation.
- Members’ Voluntary Liquidation.
If a company is insolvent, meaning either its liabilities exceed its assets, or it is unable to pay its debts as and when they fall due, then either a Compulsory Liquidation or a Creditors’ Voluntary Liquidation would be the solutions.
There are some important differences between the compulsory and voluntary routes, not least for the directors of the company. Our article Compulsory vs Voluntary Liquidation ‐ What’s the Difference? provides a helpful overview of the differences and implications of each.
A Members’ Voluntary Liquidation (MVL) is suitable where the directors wish to formally wind up a solvent company, for example due to retirement, an intractable shareholder dispute, or simply because the company is no longer needed. An MVL is often a more tax efficient route than simply applying to get the company struck off the Companies Register. You can find further information about this by clicking here to read more about MVLs.
If you believe that your company needs to be liquidated, you should seek the advice of an Insolvency Practitioner who will advise on both liquidation and any other options realistically available to the company. Seeking early advice also helps you to fulfil your legal duty as a director, to ensure that your company is not trading whilst insolvent, of which there are serious implications for the management.