Advice on the appointment of a liquidator

Authored by Kelly Burton

Kelly Burton

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Approximate read time: 4 minutes

No director should be hurried into putting their limited company into liquidation before a pre-liquidation review, and comprehensive planning has been carried out. It’s important the director has enough understanding, and agrees with the perceived outcome of the liquidation so a professional review before placing the company in liquidation can prove valuable.

Pre-liquidation planning

Before Creditors Voluntary Liquidation (CVL), you should conduct a professional, but brief review of the firm’s finances.

This review would mostly be a ‘fact-finding’ exercise; usually done face to face with an insolvency consultant. It is important to note that the pre-liquidation review may comprise of recommendations outside a CVL for the business.

At the meeting, the following may be reviewed:

  • The expectations of shareholders and directors. Do they want to rescue the business or simply walk away and ‘shut up shop?’
  • The company accounts, if necessary.
  • Details of charges over any company assets.
  • The outcome if the company enters an alternative insolvency procedure, and whether one or more of these would be more suitable.

Alternatives to liquidation:

Depending on your circumstances, liquidation might not be the best option to clear your debts. In which case, there are other insolvency arrangements which could better suit your company. These could include:

Company Voluntary Arrangement

A formal arrangement between a limited company and its creditors, in which debt is repaid in affordable, monthly amounts.


A third party, such as an insolvency practitioner, takes control of the company and makes the necessary changes to prevent it closing.

Pre-pack Administration

Before administration, some of the assets are sold, pre-arranged to a new company, often set up by parties connected to the old one. The process allows a company to continue trading with little disruption.

Pre-pack Administration

The company’s assets are sold to a new company before the liquidation, allowing trading to continue while the old insolvent company is closed.

The pre-liquidation review’s primary goal is to secure the optimum outcome for the business and its creditors. We do not charge for this initial review and will come to meet you at your place of work, your home or anywhere that is convenient. A good insolvency practitioner, will go through all of these options as alternative, they should want to get your desired outcome.

The liquidator’s appointment

During the shareholders’ meeting, the shareholders nominate the Insolvency Practitioners that they would like appointed as liquidators. Unless the creditors vote against the shareholders choice by majority vote (51% or more) or nominate an alternative liquidator, the company’s choice of liquidator will stand.

Creditors who have a debenture or security against company assets cannot vote unless they value their security. Secured creditors could be organisations such as banks, factoring companies and hire purchase companies.

If secured creditors are only secured for part of the debt owing, they have the right to vote for the unsecured balance.

A liquidator’s role in insolvency

The liquidator’s main job is to ensure creditors get some return from the insolvency process. They must act in the best interests of all creditors for the duration.

Assessing claims and assets

A liquidator’s first job is to evaluate the proof of debt forms sent by the creditors. They can either reject a claim if they feel it isn’t valid or there’s insufficient evidence, compromise with the creditor or accept the claim, either in part or in full.

Valuation, realisation and distribution

One of the most important aspects of a liquidator’s role is to obtain the highest return possible from the company’s assets. After getting a valuation of the assets available, they will be sold off; this is called the realisation of the assets. Following this, the realised funds will be distributed to creditors in the hierarchy of payment; with secured creditors at the top and unsecured creditors at the bottom.


In addition to realising the assets, the liquidator must investigate the directors’ conduct in the period before the company became insolvent. The purpose of this investigation is to ensure the directors’ actions have all been above board, make sure they haven’t been misusing company funds, and to hold them to account if any evidence of wrongdoing is found. If directors are found to have used the money irresponsibly and caused financial issues for the company, they could be held personally liable for the debt.

The directors will also be quizzed as to whether they continued trading in the knowledge that the company was insolvent. If the liquidator finds evidence of either of these, they will report the director to the Secretary of State for wrongful or fraudulent trading. Directors could face disqualification if they’re found guilty of either.

In summary

Before liquidating a company, you should review its finances with an insolvency consultant to decipher what exactly has gone awry. From there, it will be decided what the best course of action would be for the company, be it liquidation or a different insolvency procedure. If you do decide to liquidate, a liquidator will be tasked with accessing any claims sent by creditors. They will also get valuations on company assets and the realised proceeds distributed to creditors in the correct payment hierarchy. Any evidence of wrongful or fraudulent trading from the directors will be taken further and could result in disqualification.

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