Liquidate your limited company

Overview

You can choose to liquidate your limited company (also called ‘winding up’ a company).

The company will stop doing business and employing people. The company won’t exist once it’s been removed (‘struck off’) from the companies register at Companies House.

When you liquidate a company, its assets are used to pay off its debts. Any money left goes to shareholders. You’ll need a validation order to access your company bank account.

If that money hasn’t been shared between the shareholders by the time the company is removed from the register, it will go to the state.

You’ll need to restore your company to claim back money after it’s been removed from the register.

There are 2 kinds of voluntary liquidation:

• creditors’ voluntary liquidation - you and your shareholders choose to liquidate your company because it can’t pay its debts
• members’ voluntary liquidation - your company can pay its debts but you want to close it

Creditors' voluntary liquidation

A director can propose a creditors’ voluntary liquidation if:

• the company can’t pay its debts (it’s ‘insolvent’)
• enough shareholders agree

This means the company will stop trading and be liquidated (‘wound up’).

Get shareholders’ agreement

You must call a meeting of shareholders and ask them to vote.

75% (by value of shares) of shareholders must agree to the winding-up to pass a ‘winding-up resolution’.

Once the resolution is made there are 3 steps you must follow.

1. Appoint an authorised insolvency practitioner as liquidator to take charge of liquidating the company

2. Send the resolution to Companies House within 15 days.

3. Advertise the resolution in The Gazette.

Your responsibilities as a director will change.

Hold a creditors’ meeting

You must have a meeting with all the creditors within 14 days of the winding-up resolution.

At least one of the following must also be there:

• another director
• the company secretary
• the liquidator

You must tell the creditors about the meeting at least 7 days before it happens and advertise it in The Gazette.

At the meeting your company’s creditors can:

• question company directors about the company’s failure
• suggest an alternative liquidator

You must present the statement of affairs at the meeting. This gives details of the company’s situation and assets. Use:

• form 4.19 in England, Wales or Northern Ireland
• form 4.4(Scot) in Scotland

After the meeting, give the statement to the liquidator who will send it to Companies House or to the Accountant in Bankruptcy for companies in Scotland.

Members' voluntary liquidation

You may choose members’ voluntary liquidation if your company is ‘solvent’ (can pay its debts) and:

• you want to retire
• you want to step down from the family business and nobody else wants to run it
• you don’t want to run the business any more

There are 6 steps to voluntary liquidation.

1. Download a ‘Declaration of solvency’ (form 4.70) or, if your company is in Scotland, ask the Accountant in Bankruptcy for form 4.25 (Scot).

2. Fill in the declaration - it must be signed by the majority of directors.

3. Call a general meeting with shareholders at least 5 weeks later and pass a resolution for voluntary winding up.

4. Advertise the resolution in The Gazette within 14 days.

5. Appoint an authorised insolvency practitioner as a liquidator who will take charge of winding up the company.

6. Send your signed form to Companies House or the Accountant in Bankruptcy (for Scottish companies), within 15 days of passing the resolution.

What the liquidator does

The liquidator is an authorised insolvency practitioner who runs the liquidation process.

Find an insolvency practitioner through The Insolvency Service directory.

As soon as the liquidator is appointed, they’ll take control of the business.

They will:

• settle any legal disputes or outstanding contracts
• sell off the company’s assets and use any money to pay creditors
• meet deadlines for paperwork and keep authorities informed
• pay liquidation costs and the final VAT bill
• bring together people owed money (creditors) and hold meetings where necessary
• decide which creditors should be paid first
• interview the directors and report on what went wrong in the business
• get the company removed from the companies register

What happens to directors

When a liquidator is appointed, directors:

• no longer have control of the company or anything it owns
• can’t act for or on behalf of the company

If you’re a director you must:

• give the liquidator any information about the company they ask for
• hand over the company’s assets, records and paperwork
• allow the liquidator to interview you, if they ask

Re-using company names

If you were a director of a company in compulsory or creditors’ voluntary liquidation, you’ll be banned for 5 years from forming, managing or promoting any business with the same or similar name to your liquidated company.

The only exceptions to this are where:

• the business is sold by a licensed insolvency practitioner giving the legally required notice
• you get the court’s permission to use the name
• you’re involved with another company (or other type of business) that’s been using the same name as the liquidated company for at least a year

Read the guidance on re-using company names.

Access to your bank account

Your company’s bank account will be frozen when someone files a petition to wind up the company.

You need a validation order to access it.

How to apply for a validation order

Tell the person who filed the winding up petition (the respondent) you’re applying for a validation order. You must also tell them what court you’ll apply to (usually the Companies Court) and when you’ll apply.

Fill in Form 7.1A. Write a witness statement. Take the form and the statement to the court.

You need to pay a £155 fee.

What happens after you apply

You’ll be given a hearing on the same day or within the next few days.

At the hearing, you present your case to a registrar or district judge.

The respondent will present their case if they object to you getting a validation order.

At the end of the hearing you’ll either:

• get a decision - you’ll also get a written copy sent to you
• be asked to attend another hearing if the court wants more evidence

You’ll be given the validation order if your application is successful. You must give your bank a copy of this to access your company’s bank account.

If you don’t agree with the decision you may be able to appeal to the Chancery Division of the High Court.