Licensed by the association of charted certified accountants
Information on closing a company
There are many reasons why a company can close but technically just three overriding factors determine the process that must be used in any given situation. These can be briefly described as follows...
1/ Insolvent company The company has simply run out of cash, is unable to pay its bills and is technically trading insolvent. In these situations it is a director’s duty to cease trading and/or seek advice from a licensed insolvency practitioner about options for securing a future for the business.
2/ Solvent company The company may not owe any money but needs to close either due to retirement or the company has simply fulfilled the purpose for which it was established (typically a special purpose vehicle SPV) and needs to formally close and distribute assets to the shareholders.
3/ Dissolution is not a formal insolvency procedure but allows the removal of a company from the register at Companies House when it has become dormant.
Please find below further information on the range of formal liquidation and dissolution procedures available.
Creditors Voluntary Liquidation
Creditors Voluntary Liquidation ('CVL') is an insolvent liquidation where the company's assets are insufficient to pay creditors in full. Again the procedure is straightforward. The Directors, who have recognised the company's insolvency, convene meetings of shareholders and creditors. At their meeting the shareholders pass a resolutions to wind up the company and appoint a Liquidator. At the creditors meeting, creditors receive a report on the trading history of the company, may ask questions of any of the company's officers who are present, and may put forward an alternative nomination for Liquidator which is then subject to a vote.
Unlike in an MVL, in a CVL the Liquidator has a duty to submit a report on the conduct of the Directors of the company to the DTI.
A Guide to Voluntary Liquidations.pdf
For information on Creditors' Voluntary Liquidation please contact us on
01792 459 600 or send us an email.
Solvent Liquidation - Members' Voluntary Liquidation
('MVL') is a solvent liquidation where the company has sufficient assets in order to pay all of its liabilities in full within 12 months. The company may have achieved the purpose for which it was formed or its shareholders may wish to realise their investment in the company.
The procedure for an 'MVL' is fairly straightforward. The Directors of the Company swear a Statutory Declaration of Solvency to this effect, and convene a meeting of the company's shareholders in order to pass a winding up resolution an appoint a Liquidator.
The duly appointed Liquidator then realises the company's assets, pays off all creditors together with statutory interest and returns any surplus to the shareholders.
For information on Members' Voluntary Liquidation please contact us on
01792 459 600 or send us an email.
Compulsory Liquidation
Compulsory Liquidation is instigated by the Court, usually on the petition of a creditor, or a shareholder. There are grounds upon which the court can make a winding up order, the most usual being that the company is insolvent.
Upon the making of the winding up order, the Official Receiver becomes Liquidator of the company and has a duty to investigate the trading history of the company and submit a report to the DTI.
If appropriate, the Official Receiver will seek to appoint an Insolvency Practitioner as Liquidator in his place, either at a meeting of creditors or by application to the Secretary of State. The Liquidator's duty is to realise the Company's assets and distribute the proceeds to creditors.
A Guide to Compulsory Liquidation.pdf
For information on Compulsory Liquidation please contact us on
01792 459 600 or send us an email.
Dissolution
Dissolution is not an formal insolvency procedure but refers to Section 652A of the Companies Act 1985 which allows the removal of a company from the register at Companies House when it has become dormant.
Dissolution is infrequently used as it is only permitted under certain specific circumstances. Creditors must be notified of the intention to dissolve the company and can reject the application if they see fit.
It is not an alternative to liquidation as any interested parties such as shareholders and creditors can seeking to revive the company for a period of up to 20 years following dissolution to allow a proper investigation into the company's trading history to be carried out. In addition, dissolution does not terminate a company's existing contractual arrangements and if the directors remain potentially liable should the company be restored to the register in the 20 years following dissolution.
For information on Dissolution please contact us on
01792 459 600 or send us an email.
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