Starting the liquidation process - Liquidation Advice Centre

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Starting the process


Liquidation is the process where a company stops trading and its assets and property are turned into cash, in order to pay off its debts. The process can either be compulsory or voluntary, and there are three types:

  • Creditors Voluntary Liquidation is when the Directors and shareholders of the business voluntarily decide to fold the company because it is insolvent and so doesn't have the sufficient assets to cover its debts.
  • Compulsory Liquidation is when the Creditors who have not been paid by the business apply to the High Court to wind up the business, the business is then liquidated and the creditors paid.
  • Members Voluntary Liquidation is the process used when a company is solvent, however the company's shareholders decide to wind up the company in order that the assets be used to pay off the debts owed in full.

Before starting the process you need to be sure you want to liquidate your business and choose the most suitable type. Once you have done this, you then need to appoint a liquidator who will start the process.

The role of the liquidator

A liquidator is a qualified accountant and registered liquidator and they will either be instructed by you or by the court. A liquidator needs to be instructed to ensure that the process is carried out properly. If you appoint them independently you will need to show that you are acting in the best interest of your creditors and to ensure you are taking the right actions so that you are not held personally liable for the businesses debts.

Because the types of liquidation vary the process of liquidation will vary slightly, however the liquidator's job is to:

  • Seize and protect the value of the assets
  • Protect the interests of the creditors
  • Carry out investigations and make reports to companies house
  • Recover any money owed to the company
  • Pay creditors and shareholders if possible
  • Formally close the company

The Advantages of liquidation

  • Your debt is written off
  • You can start another business
  • Legal action is stopped
  • The Directors are usually able to move on

The Disadvantages of liquidation

  • The company has to close down so if you want to go back into business you will need to form a new company
  • If you want to keep some of the company's assets you will need to buy them
  • If you keep running businesses that continue to go into liquidation you may find that people no longer have faith in your business

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This website has been written and intended for registered limited companies in the UK only. The site contains general information and resources for limited companies only in financial trouble. Insolvency Helpline only work with limited companies to offer solutions for their business debt problems. Insolvency Helpline cannot offer help or advice any other entity except limited companies. Insolvency Helpline does not advise individuals, sole traders or partnerships seeking debt advice. If you are an individual, sole trader or partnership seeking advice, we recommend using an alternative service.

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