Winding Up of a Company
When it comes to the winding up of a company, it is important to be aware of the best methods for ending or dissolving your business. In any process that results in the Liquidation of a business by an insolvency expert, the aim will be to find the ideal financial conclusion as the business ceases operating. This will likely involve:
- selling all of the company assets
- paying off any existing creditors, and
- distributing any remaining assets between existing shareholders (in cases where the business is solvent)
It is important to know that while it may seem relatively quick and easy to set up a company, the procedure for winding up of a company is often much more complex. When it comes to winding up a company in the UK, the process is largely dependent on whether the business is currently solvent or insolvent.
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Three Key Questions on the winding up of a company
What is the procedure for winding up of a company that is solvent?
Depending on the situation with regards to the solvency of your business, the resolution can be made either by company shareholders, or it can be one that is ratified by your creditors.
There are two ways to go about winding up of a company that is solvent:
- Company Dissolution
- Members Voluntary Liquidation (MVL)
What do these methods for winding up a company in the UK involve?
For a solvent company, this involves shareholders agreeing to a voluntary winding up resolution through the appointment of a Liquidator. In this situation, the task of the Liquidator is that they should realise any assets of the company so that they can be used to pay back all creditors and share any remaining capital with shareholders.
For an MVL to take place, the business needs to be solvent and able to meet its obligations. This basically means that the value of any remaining assets should be more than the total sum of any current debts or liabilities. If this is the case, and the majority of directors sign the Declaration of Solvency, it will confirm that they have reviewed all of the company’s balance sheets in detail to ensure that the company is equipped to repay all of its existing and any other future debts, plus the required levels of interest, within one year of the date of liquidation.
In addition to the business needing to be solvent for there to be a company dissolution, it must also be that:
- The business cannot have changed name over the past three months
- The business must not have sold or traded any stock over the past three months
- The business must not currently be under the threat of liquidation or other insolvency processes
- The business cannot have any outstanding creditor agreement, such as a Company Voluntary Arrangement
This form of company dissolution is one of the simpler ways of winding up a company in the UK. We can help you to navigate the process once your DS01 form has been signed by the majority of the company directors. This form will be sent to Companies House and any other ‘notifiable parties’, which would include parties such as creditors, employees and other shareholders, as well as a notice on the dissolution being placed in the Gazette.
Once three months has passed without any objections, The Gazette will then run a final notice on the dissolution of the company. This makes it one of the easiest and most financially efficient procedures for winding up a company that is currently solvent.
How do you complete the winding up of a company that is insolvent?
In a situation where a company is insolvent, the best way to go about winding up is through liquidation, with the two types of liquidation being:
- Creditors’ Voluntary Liquidation (CVL)
- Compulsory Liquidation
Creditors’ Voluntary Liquidation (CVL)
More information on this method is available across our site, but in short, we would advise on a CVL if the business is insolvent and/or does not appear to have viability going forward, even with a restructuring. There are three main parts to a Liquidators role in such a process:
- Realise any assets of the business
- Find agreements on the claims of creditors to the business
- Investigate any affairs related to overall company and individual director conduct