Partner Article

How to Liquidate a Company

Liquidating a company in the United Kingdom is a big decision that must be made with all the shareholders. Companies liquidate usually because of difficult financial times and being unable to repay their debts, which forces them to close the doors, sell the assets and pay back their creditors.

If only it was this easy. Liquidating a company is a long and detailed process with a number of steps that must be taken to ensure that everything is done to close down the company, pay back the creditors and shut the doors with complete peace of mind that you have done everything you can to repay your debts and your company closed the doors on good standing with all your creditors.

There are three types of liquidation that you need to know about. The first is compulsory, which is when you are served a winding up petition where one of your creditors has applied on your behalf to force you to close the doors and pay back your debts.

There are then two types of voluntary liquidation that also needs to be taken into consideration. The first is members voluntary liquidation, which is the process chosen if the company is completely insolvent with very little chance of repaying their creditors moving forward. The second is creditors voluntary liquidation where the company hopes to pay back their creditors by selling their assets.

With all liquidations there is a winding up process. The winding up process is the ending of business affairs, getting all the company affairs in order, selling the assets, settling legal disputes, collecting monies owing to the company and distributing the funds to the creditors.

The winding up process covers everyone from the customers to the suppliers to the employees. A liquidator is nominated; the liquidator takes control of the liquidation process. The liquidator must be an authorised and licensed insolvency practitioner. The director steps down, handing full control, assets and affairs to the liquidator.

During this time, the liquidator then completes all contracts. This may be ending employee contracts, transferring customer contracts and advising suppliers of the process being taken.

It is important to note that a licensed insolvency practitioners main priority is your creditors. Many company directors are under the impression that the insolvency practitioner is there to protect them during the liquidation process, but this is not the case. In fact an insolvency practitioner cannot focus on the creditors and director, as this could be a conflict of interest.

If your company is considering members voluntary liquidation, then all members must sign a Declaration of Solvency. A shareholders meeting must be held where an authorised insolvency practitioner is appointed as liquidator to handle the winding up process.

The liquidator will be responsible for preparing and filing all taxes, selling assets, collecting monies and paying creditors. They will hold a final meeting before the company is dissolved for good.

With a creditors voluntary liquidation process, the shareholders must have a meeting where everyone agrees this is the best way forward for the business. On the same day they must hold a meeting with their creditors. Both shareholders and creditors have the ability to appoint a liquidator, but the creditors choice will outweigh the shareholders, as liquidators work in the benefit of the creditor.

Once the liquidator has been appointed, the director stands down and the liquidator gets to work winding up the company’s affairs. They will dispose of all assets, collect outstanding monies and pay the creditors.

It is important that the shareholders understand the difference forms of liquidation and then decide which the best option is moving forward.

About Us: Jameson, Smith & Co is a company debt specialist based in London in the United Kingdom. This well-established company offers free business debt advice with a host of services. The dedicated and experienced team of professionals offer everything from business rescue plans to personal guarantee issues and cash flow problems to overdrawn loans, liquidations and so much more. Jameson, Smith & Co has helped hundreds of companies with their business debt, focusing on the director and ensuring due care to creditors at all times. They have built up a solid reputation in the UK for their outstanding customer service and support. To find out more, visit http://www.companydebt.com/liquidation/.

This was posted in Bdaily's Members' News section by Mike Smith .