During challenging economic times like these, it is often a natural inclination to bury your head in the sand and put off dealing with the real issue, but the earlier you get in touch with an Insolvency Practitioner, the greater your range of options.

What does it mean when a business goes into liquidation?

Business liquidation is the process of closing down a limited company by an appointed Insolvency Practitioner (the liquidator). The business assets are sold and the money is then distributed to creditors (lenders and suppliers) in order of priority. 

As Insolvency Practitioners, our first objective is to always try to save your business, that's why getting in a touch with an Insolvency Practitioner, as soon as you start experiencing cash flow issues is advisable. It could be a business restructuring or turnaround management could help you address your financial or operational challenges effectively and get you back to doing what you do best - running your business and looking to the future. 

However, sometimes liquidating your company is the best solution in the circumstances. It is good to have a greater understanding of what this is and the different options available. Depending on your situation, the outcome isn't always as negative as you may imagine it to be. 

Liquidating your company

If you're a company director it's important to understand clearly the different options available when it comes to liquidation. 

There are two voluntary liquidation processes and one compulsory. 

Voluntary liquidation - the directors and shareholders appoint a liquidator either through a Creditors Voluntary Liquidation or a Members’ Voluntary Liquidation. 

Compulsory liquidation- compulsory liquidations are initiated by a court order and this can be lodged by the company or the creditors. Often this is HMRC, the bank or a trade supplier.   

Voluntary liquidation of a solvent company

A Members' Voluntary Liquidation (MVL) is a good option when winding up a viable business. This lets you extract the cash from your business while winding down your company in a tax-efficient way. This is only an option if all the company’s debts can be paid in full.  

 Voluntary liquidation of an insolvent company

In a Creditors’ Voluntary Liquidation (CVL) the directors and shareholders of a company nominate an Insolvency Practitioner to act as Liquidator to deal with the winding up. This appointment is then agreed to by the creditors. 

Compulsory Liquidation

Compulsory liquidations are often initiated by a creditor due to the large amount of debt owed to them. The creditor applies for a court order to place the company into liquidation and this normally forces the company to cease trading. A Winding Up petition can also be lodged by the company’s directors if a company is unable to pay its debts as they fall due. When the court approves, an Insolvency Practitioner is then appointed to manage the process. 

Can I stop a compulsory liquidation?

When a business has been served with a winding up order you can take action and try to stop it, but you only have seven days to do so. Speed is therefore of the essence and the earlier you act the better. Ideally you would have contacted an Insolvency Practitioner for help before you receive a winding up order, but if you haven't, there could still be time if you move quickly. The Insolvency Practitioner can then review your situation and will talk you through the range of options that may be available to you which can include paying off the debt or even a Company Voluntary Arrangement (CVA). A CVA is a formal arrangement between your insolvent business and your creditors. A CVA must have buy-in from your creditors, but if approved, it allows your business to keep trading and repay the debt due to your creditors over a longer term schedule.

How we can help

Wherever you are, whatever issue you face, the earlier you act the more options you have. We understand this is an incredibly worrying time and that’s why we’re here to help you through. If we can save your business through turnaround management and cash flow planning, that will always be our first objective. 

If a liquidation is the most appropriate option, we’ll manage this for you and clearly explain the options available to you, before agreeing on an approach together. We'll explain every step along the way, managing everything on your behalf, to make what can be a stressful time, as smooth and easy as possible. We really do pride ourselves on the close relationships we establish with our clients to provide them with the best and most appropriate solution for their needs. Our team has many years experience in restructuring businesses, turnaround management and managing liquidations with our clients’ interests at heart.  

Liquidations - frequently asked questions

If you're interested in finding out more about business liquidations and the processes involved, you may find our Business Liquidations FAQs guide helpful. We've based this on commonly asked questions we hear from clients. Click on the button below to download your copy.

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Let's get started

We’re here to help. If you're ready to talk, get in touch with me at Matt.Henderson@jcca.co.uk for an initial chat about your situation. We’ll then get started on a plan. 

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