Liquidation means the end of a limited company and its striking off the register at Companies House.
For directors, the process can be confusing and sometimes daunting.
This article will explain the process in detail, broken down into simple steps.
What’s the Insolvent Liquidation Process and Procedure?
The first step for any director of an insolvent company is to make contact with a licensed insolvency practitioner. There is no getting around this since any liquidation must legally be conducted by an IP.
The process which unfolds next will differ slightly depending on whether your company is being forced into compulsory liquidation, or if you’re choosing voluntary liquidation before that happens.
Liquidation Process in 7 Steps
- Once the IP has been engaged, directors will pass a Special Resolution to Wind up the Company, as per the Companies Act 2006.
- The liquidation will be advertised in the London Gazette, as per legal requirement, within 14 days of the special resolution. As soon as these are submitted, your company bank accounts will be frozen.
- At this point, no further business can be conducted via the company, staff will be laid off, all the accounting records should be delivered to the IP, while any creditor communication can simply be dealt with by the liquidator (IP).
- Convening the Creditors & Shareholders Meeting – The IP will arrange the meetings of shareholders and creditors, a process which happens usually within 21 days from this point.
- Creditors and Shareholders Meetings – These usually happen via video link and, in most cases, do not need to be attended in person. One director must be present. If creditors have particular questions, this is their chance to ask them.
- Company is now placed into liquidation, and the subsequent process will take approximately 12 months. The liquidator’s job is to sell any assets the company may have and then pay creditors with the proceeds, in strict order of priority.
- Once all the creditors have been paid, the company is struck off the register at Companies House and the process ends.
Can I Start a new Company After Liquidation?
Assuming no directorial misconduct has led to a directorship ban, you are perfectly entitled to start a new company.
If this is in the same field, there are strict laws around what is called ‘phoenixing’, which is starting a new company from the ashes of the old. You can’t use the same company name, for example, or a similar one. And any assets from the original company can only be purchased by direcors at a fair and independently verified price.
An insolvency process known as pre pack administration exists specifically to facilitate the process of starting a new company using assets or intellectual property from the liquidated business.