What is voluntary liquidation? What does liquidation mean?

Derek Robinson Regional Manager

Creditors Voluntary Liquidation

Creditors Voluntary Liquidation is started by the directors, they tell the shareholders the company is not viable, it is insolvent and they must stop trading. The shareholders then ask a licensed insolvency practitioner to call a creditors meeting as soon as possible (not less than 14 days notice is required, but its usually 21 or so days). At this meeting the creditors vote to appoint a liquidator.  These meetings are usually held virtually unless this is explicitly requested by at least the following;

  • 10% by value of creditors or
  • 10% in total number of creditors or
  • 10 individual creditors

Then a physical meeting can be held

Why not watch the video?

So, this is why it’s called Creditors Voluntary Liquidation. It’s very common, quick and a very powerful way to close a business and deal with things properly. You can get on with a new business or job, the company is closed, leases cancelled and all the staff made redundant.


Liquidation usually means the company’s trading stops and it’s assets are turned into cash or “liquidated”. All other possible liabilities, like employment or renting a property, are stopped. It really is the end of the company, but the “business” may survive.

There are three types of liquidation/close down in the UK:

Now read guides below or click on Liquidation Flowchart for a quick guide.

NEW January 2018 – Complete Guide to Creditors Voluntary Liquidation – 50 page PDF free to download

What does a liquidator do?

He or she runs the liquidation, fills out all the forms, calls all meetings and investigates the conduct of the directors before the liquidation. He collects assets and turns them into cash. He then works out the debts and pays the creditors from the assets, if there were any.

What do we do as directors?

Once the company is “in liquidation” the directors have to fill out a  questionnaire for the liquidator our online data collection service makes this easier also we can convert Sage files into our system.  The directors then  provide all of the company’s books and records to the liquidator. After this there is a creditors’ meeting which a director must attend. After that, very little else usually.

Can I start another company with the same name?

Be VERY careful on this one. You must not trade with a similar name as the previously liquidated company without careful legal advice or leave of the court. Breaching s216 Insolvency Act 1986 is a possible criminal offence. We can guide you through this possible minefield.

Can I become a director of another company if my company is liquidated?

Yes! Don’t worry, you can be a director of another company (remember s216 above). But always act properly, don’t take chances and think you are a smarter than the law. You aren’t, lots of people think they are and end up in personal financial trouble. Call us now, ask all the questions you want for free. Call now for advice on 0845 519 4930.


Compulsory Liquidation

This is a different type of liquidation. It is started by a creditor who has usually not been paid for supplies or services. The creditor will ask the High Court to hear a “Petition” to wind the company up. If the Court agrees and or the debt is not paid, then a “hearing” is held say 40-60 days later, typically in front of a High Court judge who then passes an order to wind the company up compulsorily.

This is a common tool for debt collecting, all the creditor has to do is have an overdue debt over £750 and then ask a solicitor to start the winding up process.  If  a company ends up being compulsory wound up their is an automatic  investigation into the directors conduct.  Generally in a CVL there is only an investigation if there is good reason to believe there has been fraud or wrongful trading.

Facing this threat? CALL NOW! or see this guide to winding up petitions here (opens a new page on www.companyrescue.co.uk)

We can use our huge knowledge of the law to stop this process, if you have a viable company.

Most often it is the tax man that issues petitions, they simply want to get the taxes collected or stop you trading to stop the tax debt rising. Facing this threat? CALL NOW on 0845 519 4930.


Members Voluntary Liquidation (MVL)

This is used when a company has lots of assets but no further purpose. The company assets are liquidated and turned into cash, This is then paid to creditors and shareholders. In a MVL every creditor has to get paid in full. Most often this is for rich companies with lots of assets.

A statutory declaration of SOLVENCY is required, this is an important legal process and expert advice is required. You must take care when going down the members voluntary liquidation path. Call now for advice on 0845 519 4930

See an experts guide to MVL here

Only a licensed INSOLVENCY PRACTITIONER (IP) can liquidate a company. Most IP’s never speak to directors leaving this to their staff. Want to speak to an IP today?

We could help you start the liquidation process today, please call on 0845 519 4930 in office Hours 8.15am till 5.00pm. Or call Wayne Harrison (IP) direct on 07879 555349 or Eric Walls (IP) direct on 07787 278527.

It may be easier to understand the process by looking at our flowchart