If you wish to close your limited company, you will need the services of a licensed insolvency practitioner (IP) to act as liquidator.
A liquidator’s role will vary depending on the solvent or insolvent status of the company. Regardless of the solvent state, a director will need to instruct a licensed insolvency practitioner to carry out the appropriate liquidation.
There are three types of liquidation available to limited companies. Two of these are designed for insolvent companies; creditors voluntary liquidation (CVL) and compulsory liquidation. For solvent companies a members voluntary liquidation (MVL) may be an appropriate solution.
The liquidator’s role in CVL
After a company enters into a creditors voluntary liquidation (CVL), any assets will then be realised, turning them into cash. This will be distributed to the company’s creditors on a pro rata basis, after agreed liquidator’s costs and fees have been deducted.
In a CVL, the liquidator will handle the liquidation process, consider claims from creditors, organising the creditors’ meetings (usually virtual), completing and filing all necessary paperwork and investigating the conduct of the director(s) of the company, for the period prior to the liquidation starting.
Throughout the process, we, in the role of the liquidator will:
- Turn any company assets into cash to be distributed to creditors.
- Process any claims that received from creditors of your company.
- Where applicable assist employees to claim arrears of wages, holiday pay, redundancy and pay in lieu of notice.
- Investigate conduct of the company director(s), as well as any shadow directors in the period preceding the liquidation
- Distribute cash to creditors of your company on a pro rata basis as and when money is made available after deducting our fees.
The liquidator’s role in a compulsory liquidation
A company will be placed into compulsory liquidation after a winding-up petition has successfully been filed against the company by a creditor or a director. If the petition is not dealt with quickly, a Winding up Order issued and the case will be passed on to the official receiver (OR) – a civil servant and High Court officer – who will deal with the liquidation.
Once a company is in compulsory liquidation, directors will no longer be in control of the business or any assets or property relating to the business. If an insolvency practitioner is appointed, they will act as a liquidator completing the same tasks as the OR.
Any powers you have as director of the company will cease with immediate effect, meaning that you will no longer be able to act for/on behalf of the company. You will still have your director responsibilities to comply with, such as looking out for the best interests of your creditors, but you will no longer be able to manage the day to day business affairs.
Once the company enters into compulsory liquidation, you should not use or sell the company’s assets in order to make payment to your creditors or for your own use/benefit.
If you are also an employee of the company (as well as director), then employment will cease when the winding up order is issued. The OR/IP dealing with the liquidation will be able to provide details on how to claim for any unpaid wages, holiday pay, redundancy and for pay in lieu of notice.
- The liquidator’s powers in a compulsory liquidation include taking over the day to day management of the company from the director when they are appointed.
- Sell the company’s assets.
- Be able to bring and defend legal proceedings regarding the company.
- Assist with employee claims.
- Consider all claims from creditors.
- Pay dividends to unsecured creditors, if enough funds are available after company’s assets have been sold and costs have been paid.
- Investigate the director(s) for the period prior to liquidation.
The liquidator’s role in MVL
If you decide that you would like to close your company via members voluntary liquidation (MVL), you will need to get in touch with a tax specialist to obtain tax advice prior to entering into the MVL procedure.
After you have done this, get in touch with us and we will be able to talk you through the MVL process and what is involved for you and your company in this solvent liquidation procedure.
We will help you to prepare all the paperwork required including the statutory declaration of solvency which needs to be completed before an MVL can take place. We complete all statutory requirements and guide you through the process.
After the company has been dissolved and your obligations as director have been removed, payments will be issued to you and all shareholders, after they have been received.
The role of a liquidator is to essentially manage the liquidation of a company. Regardless of whether or not a business is solvent or insolvent, a liquidator must stick to the procedures set out in place to efficiently close the company. The liquidation of a company can only be carried out be a licensed and regulated insolvency practitioner.
How we can help
If you are looking to liquidate your company but aren’t sure which path to go down, we have eight licensed insolvency practitioners to help you every step of the way. Our practitioners are experienced in ensuring that all regulations are met.