Originally posted on https://www.companyliquidationservices.co.uk/frequently-asked-questions-about-a-company-liquidation/#.XUKbt-hKiUk

 

What is a Creditors’ Voluntary Liquidation?

A Creditors Voluntary Liquidation (CVL) is a process that allows the directors of an insolvent business to wind up the company for the good of its creditors.

 What is a company voluntary liquidation?

There are two forms of company voluntary liquidation. The first, a Members Voluntary Liquidation (MVL) is where the company is solvent, but the directors have taken the decision to close the business. The second, a Creditors Voluntary Liquidation is where the company is insolvent, and the directors decide to liquidate the company to return what value is left to the creditors.

 What is the Company liquidation process?

Very simply the process is that the company ceases to trade, the assets are sold off and then the value is returned to the creditors in line with their place in the distribution order. Please note though that this is a very simplified version and there a lot of steps that have to be taken in the right order.

 How long does liquidation take?

This is very much dependent upon the individual circumstances that the company finds itself in. A large and complex company make take years from start to finish however a very small, simple company that chooses to go for a Members’ Voluntary Liquidation may take a few months.

 Can a company in liquidation still trade?

No. by the time a company is in liquidation it is being wound up and trading would only increase its indebtedness. This is different to a company in administration where the administrator may choose to allow the company to trade pending a sale.

 Can a company survive liquidation?

In general, a liquidation process is the end of life for a company. There are exceptional circumstances where the procedure could be stopped but this is highly unlikely.

What is much more likely is that the trading style of the business continues but owned by a different legal entity.

 If I liquidate can I re-start my business without the debt?

Yes, this is possible however there are restrictions on the name you use. It cannot be the same or similar to the business that is in liquidation or struck off the Companies House register.

It would be possible to buy any trademarks or trading names from the liquidator and then use them to trade however the price paid would have to be a market price.

 How long does company liquidation take?

This is very much dependent upon the individual circumstances that the company finds itself in. A large and complex company make take years from start to finish however a very small, simple company that chooses to go for a Members’ Voluntary Liquidation may take a few months.

 Can I use someone that isn’t licensed as a liquidator?

No. You must use a Licensed Insolvency Practitioner as they are the only people who can deal with a voluntary liquidation of your company.

 How do I apply for company liquidation?

This depends upon whether you are a director of the company or a creditor.

If you are a director then it is important that you take advice from an experienced and qualified insolvency practitioner as this is not a DIY process.

If you are a creditor of a company that is delinquent in paying its debts then you are best to take legal advice before launching any action as a mistake can prove to be very costly.

 Can a company in liquidation be bought?

This really depends upon what point in the liquidation process the company is at.

Usually a business will trade in administration whilst the liquidator tries to find a buyer. If this is not possible then the company will be liquidated, the assets sold and the company struck off. It is possible to buy the business within the process but there may not be much left.

Much more usual is where a trade buyer purchases the Intellectual Property of the company such as trademarks and names and then trades using these.

 Are company liquidation costs tax deductible?

Liquidation fees are payable by the company being wound up. In the case of an MVL, this may involve a formerly profitable company that is ceasing to trade and they would be able to claim the cost of asset disposal as a tax-deductible expense.

In the case of a CVL where the company is insolvent, it is unlikely that the business is profitable and so the situation wouldn’t arise.

 Can a company in liquidation sue?

Yes. It is the liquidator’s duty to realise as much value as practically possible for the creditors and if the company is owed money, they are able (and sometimes bound) to sue. This must be balanced of course with the time that it takes to realise any values through the court process and the risk of not winning.

 Can a company in liquidation enter into a contract?

A liquidator will not allow a company to enter into a contract to supply goods and services. However, the liquidator may contract with third parties to provide services in connection with the liquidations. For example, they may contract with a carrier to transport assets to a buyer’s premises or they may contract with an auctioneer to sell off the assets of the business.

 Can a company in liquidation be reinstated?

If the company has been liquidated and struck off the register, then it cannot be reinstated. This is different from dissolution where creditors can apply for reinstatement of the entity.

 Can a company in liquidation commence proceedings?

Yes. It is the liquidator’s duty to realise as much value as practically possible for the creditors and if the company is owed money then, they are able (and sometimes bound) to sue. This must be balanced of course with the time that it takes to realise any values through the court process and the risk of not winning

 What are the Directors’ liabilities within insolvency?

Directors can be liable for the debts of a company in certain circumstances for example if they have given a personal guarantee or if the liquidator finds evidence of wrongful trading.

 What are the costs to liquidate my company?

The costs for a liquidation vary widely and are dependent upon the complexity of the business, availability of records and the cooperation of the former directors. In general, you can expect to pay a minimum of £2,500 for a very simple case.

 What redundancy payments are available when a company is in liquidation?

An employee of a Limited Company has a right to claim monies owed to him (for arrears of wages, holiday pay, notice pay & redundancy pay) from the Insolvency Service, Redundancy Payments Office (“RPO”)

 In a Company liquidation who gets paid first?

There’s a strict order in which people get paid when a company goes into liquidation.

Creditors are assigned to a class and the proceeds from the liquidation are paid out to each class. Only when a class has been fully paid out can the liquidator move on to the next class.

The order that people get paid is as follows;

1. Secured creditors with a fixed charge
2. Preferential creditors
3. Secured creditors with a floating charge
4. Unsecured creditors
5. Shareholders