Understand the position
Clear information before you decide what to do next
Understand the principal company liquidation routes, what happens to company assets and what directors should prepare.
- Identify whether the company is solvent or insolvent
- Understand voluntary and compulsory routes
- Prepare records, assets and creditor information
Liquidation is a formal process
Liquidation closes a company, brings its affairs under the control of a liquidator and uses available assets for the benefit of creditors. The correct route depends on whether the company can pay its debts and whether directors or creditors initiate the process.
The main liquidation routes are different
An insolvent company may enter Creditors’ Voluntary Liquidation following a director led decision and shareholder approval. Compulsory liquidation follows a court order, commonly after creditor action. A solvent company may instead use a Members’ Voluntary Liquidation.
Directors still have responsibilities
Directors are expected to preserve company records and assets, provide accurate information and cooperate with the appointed office holder. Personal guarantees, overdrawn loan accounts and recent transactions should be reviewed separately.
Practical next steps
What to prepare now
A clearer picture helps the first conversation focus on realistic options.
- Confirm whether the company can pay all debts
- List assets, creditors and outstanding contracts
- Review personal guarantees and director accounts
- Discuss the appropriate route before creditor action advances
Common questions
Company Liquidation FAQs
What is the difference between voluntary and compulsory liquidation?
Voluntary liquidation is initiated through the company and its shareholders. Compulsory liquidation follows a court winding up order, usually after creditor action.
Does liquidation clear personal guarantees?
No. A personal guarantee is separate from the company’s liability and may be enforced against the person who gave it.
Can a company trade after liquidation starts?
Trading normally stops, although a liquidator may take limited steps where they benefit creditors. The precise position depends on the appointment and circumstances.
This page provides general information and is not legal, tax or financial advice. The right action depends on the company’s circumstances. Formal insolvency procedures must be handled by an appropriately authorised professional.
