Company Liquidation [2023 Guide]

In the context of company insolvency in England & Wales, liquidation refers to the formal process of winding up a company’s affairs and distributing its assets to creditors and shareholders. It is a legal procedure initiated when a company is unable to pay its debts and is deemed insolvent. The purpose of liquidation is to bring about an orderly and fair distribution of the company’s assets to satisfy its outstanding obligations.

There are two main types of insolvent liquidation procedures under the current legislation:

Compulsory Liquidation

This is initiated by a court order following the presentation of a winding-up petition, typically by a creditor or the company itself. The court will appoint an Official Receiver or an insolvency practitioner (known as the liquidator) to oversee the process. The liquidator’s primary responsibility is to sell the company’s assets, settle outstanding debts to the extent possible, and distribute any remaining funds among creditors according to their priority.

The legislation governing compulsory liquidation is primarily contained in the Insolvency Act 1986, supplemented by various regulations and case law.

Creditors’ Voluntary Liquidation (CVL)

This is a voluntary process initiated by the company’s directors and shareholders. It involves holding a shareholders’ meeting and subsequently a creditors’ meeting, where a resolution is passed to wind up the company. The shareholders appoint an insolvency practitioner as the liquidator to administer the liquidation.

• The provisions governing Creditor Voluntary Liquidation are outlined in the Insolvency Act 1986, as well as the Insolvency Rules 2016, which provide detailed procedures and requirements for conducting a CVL.

What is the difference between compulsory liquidation and voluntary liquidation?

The main difference between voluntary liquidation and compulsory liquidation is that with compulsory liquidation this is a procedure brought against a company rather than with company cooperation. Compulsory liquidation is usually brought by a company’s creditors whereas creditors voluntary liquidation and members voluntary liquidation (solvent liquidation) is brought by the company itself.

• During the liquidation process, the appointed liquidator assumes control of the company’s affairs, collects and sells its assets, investigates its financial affairs, and distributes the proceeds to creditors according to their statutory priority.
• Any remaining funds, if available, are distributed among the shareholders in accordance with their rights and entitlements.

It’s important to note that the liquidation process is complex and involves various legal requirements and obligations. Companies and their directors should seek professional advice from qualified insolvency practitioners or legal professionals to ensure compliance with the applicable legislation and to navigate the liquidation process effectively.

At Francis Wilks & Jones we have an expert team who have been advising companies and directors on a wide range of insolvency related issues since 2002. We can help you too.

When a company goes into liquidation in England & Wales, it means that the company is being wound up and its affairs are being brought to an end.

The company’s assets are sold or “realised”, and the proceeds are used to settle its outstanding debts to the maximum extent possible. The remaining funds, if any, are distributed to the company’s shareholders in accordance with their rights and entitlements.

The legislation governing the liquidation process in England and Wales is primarily outlined in the Insolvency Act 1986, supported by the Insolvency Rules 2016. Here’s an overview of what it means when a company goes into liquidation:

• Insolvency. Generally, a company goes into liquidation because it is insolvent, meaning it is unable to pay its debts as they fall due. Insolvency can occur due to various reasons, such as financial mismanagement, economic downturn, or loss of business.

• Appointment of a liquidator. In liquidation, a licensed insolvency practitioner is appointed as the liquidator. The liquidator takes control of the company’s affairs, collects and sells its assets, settles its debts, and distributes any remaining funds among the shareholders.

• Cessation of trading. Once a company goes in to a liquidation process and enters liquidation, it typically ceases trading operations. Any ongoing business activities are carried out by the liquidator with the objective of winding up the affairs of the company.

Directors of a company in liquidation may face certain risks and potential liabilities, including.

• Personal liability. Directors may be held personally liable for any wrongful or fraudulent trading leading up to the liquidation if they acted in a manner that knowingly disadvantaged the creditors or breached their fiduciary duties.

• Misfeasance claims. Directors can be subject to misfeasance claims if their actions or decisions prior to liquidation are deemed to have caused a loss to the company or its creditors.

• Director disqualification. If the conduct of directors is found to be unfit, they may face director disqualification from acting as directors for a specified period.

• Director investigations. The liquidator has the power to investigate the conduct of directors and report any misconduct or wrongful behaviour to regulatory authorities.

Reasons to use the team at FWJ.

Engaging a professional law firm such as FWJ with expertise in insolvency law and director defence can provide several benefits during the liquidation process.

• Legal expertise. We provide expert advice on the legal obligations and responsibilities of directors during the liquidation process, helping them navigate potential risks and liabilities. We also act in director defence claims – including director disqualification, misfeasance, wrongful trading and many others.

• Good to get on with. We understand that using a lawyer, often for the first time, can be daunting. We pride ourselves on not only having an expert team, but a friendly one too.
• Protection of directors’ interests. We can help protect directors’ rights and interests, ensuring they comply with legal requirements and minimise personal liability.

• Communication with creditors. Our team can deal with communications with creditors, negotiate settlements, and help directors fulfil their obligations in dealing with creditor claims.

• Compliance and documentation: Liquidation involves various legal requirements and documentation. A professional firm such as FWJ is needed to ensure proper compliance, assist in the preparation of necessary documents, and handle court and other regulatory filing.

• Legal representation: If legal disputes or claims arise during the liquidation process, our specialist team firm can provide legal representation and advocacy on behalf of the directors.

• Asset recovery: Our recovery experts can assist in identifying and recovering assets, potentially maximising the funds available for distribution to creditors. We regularly recover considerable sums back in to the liquidation.

Overall, engaging with the team at Francis Wilks & Jones can help directors navigate the complexities of the liquidation process, protect their interests, ensure compliance with the law, and mitigate potential risks and liabilities.  We can help provide the breathing space you need, giving expert guidance, legal representation, and support throughout the entire liquidation process – whilst allowing you to focus on fulfilling your director fiduciary duties effectively.

In England and Wales, voluntary liquidation refers to the process by which a company chooses to wind up its affairs and cease operations due to its inability to pay its debts. It is initiated voluntarily by the directors and shareholders of the company, rather than being compelled by a court order.

Voluntary liquidation is primarily conducted through a procedure known as Creditors’ Voluntary Liquidation (CVL). The legislation governing CVLs is primarily contained in the Insolvency Act 1986, along with the Insolvency Rules 2016, which provide detailed procedures and requirements for conducting a CVL.

There are two main types of voluntary liquidation procedures:

Creditors’ Voluntary Liquidation

A Creditors’ Voluntary Liquidation (CVL) is the most common form of voluntary liquidation when a company is insolvent and unable to pay its debts. The directors of the company convene a meeting of shareholders, who pass a resolution to wind up the company and appoint an insolvency practitioner as the liquidator.

Following this, a meeting of the company’s creditors is held to confirm the appointment of the liquidator and consider any proposals made by the liquidator regarding the company’s assets.

Here is an overview of the CVL process:

• Directors’ meeting. The directors of the company typically convene a meeting to discuss the financial situation of the company and the option of voluntary liquidation. They must make a declaration of solvency, stating that the company will be able to pay its debts, including interest, within a specified period not exceeding 12 months.
• Shareholders’ meeting. Once the directors have made the declaration of solvency, they must call a general meeting of the company’s shareholders. A special resolution is passed to authorise the voluntary liquidation and appoint a licensed insolvency practitioner (liquidator) to oversee the process.
• Appointment of liquidator. The shareholders appoint a licensed insolvency practitioner as the liquidator. The liquidator takes control of the company, ceases its operations, collects and realises its assets, and distributes the proceeds to creditors in accordance with the statutory priority of claims.
• Creditors’ meeting. The liquidator calls a meeting of the company’s creditors, providing them with relevant information about the company’s financial affairs. Creditors have the opportunity to submit their claims and vote on matters such as the appointment of a liquidation committee (if required) and the approval of the liquidator’s fees.

The procedures and requirements for a CVL are primarily governed by the Insolvency act 1986, along with the Insolvency Rules 2016, which provide detailed guidelines for conducting the process.

Members Voluntary Liquidation.

A Members’ Voluntary Liquidation (MVL) is a form of voluntary liquidation which is used when a company is solvent, meaning it is able to pay its debts in full within a 12-month period. The purpose of a Members’ Voluntary Liquidation (MVL) is to wind up the company’s affairs in an orderly manner and distribute its assets to shareholders.

Unlike a Creditors’ Voluntary Liquidation (CVL), an MVL is initiated when the directors of the company make a statutory declaration of solvency stating that they have made a full inquiry into the company’s financial position and believe it can pay its debts in full, with interest, within the specified time frame.

The legislation governing MVLs is primarily outlined in the Insolvency Act 1986, supplemented by the Insolvency Rules 2016.

In both types of voluntary liquidation, the appointed liquidator takes control of the company’s affairs, collects its assets, settles its debts to the extent possible, and distributes any remaining funds among creditors (in the case of CVL) or shareholders (in the case of MVL) according to their statutory entitlements.

Contact us today

It is important for directors and shareholders considering voluntary liquidation to seek professional advice from qualified insolvency practitioners or legal professionals to ensure compliance with the applicable legislation and to navigate the liquidation process effectively.

Our brilliant team at FWJ has been advising on liquidation matters since 2002 – and works with a range of trusted professionals.  Contact us today for a free initial phone call and help.

There is often some confusion about the term creditors voluntary liquidation, which we is due normally to the term ‘voluntary’. Our team can help guide you through the process.

• Creditors’ Voluntary Liquidation (CVL) is a process available to insolvent companies in England and Wales that allows the directors and shareholders to voluntarily wind up the affairs of the company. The primary purpose of a Creditors Voluntary Liquidation (CVL) is to ensure an orderly distribution of the company’s assets to its creditors.
• Creditors Voluntary Liquidation (CVL) is a liquidation process that is commenced by the directors of an insolvent company. This is why it is referred to as voluntary insolvency, as opposed to the process of compulsory liquidation which is where a liquidation is forced upon a company by a creditor owed money.

Why would a company volunteer to go into liquidation?

Directors of companies have certain duties to the company and to creditors. When the company is in a solvent situation, then these duties are predominantly to the shareholders of the company. However, once a company passes the point of insolvency, the directors’ duties are primarily to the creditors of that company.

• this means that if directors continue to trade while increasing debts to creditors, without the reasonable belief that they are going to be able to be repaid in full, then they are breaching their duties to creditors of the company or companies in liquidation and may in due course be personally liable to creditors.

• therefore, a responsible board of directors will keep a very close eye on the financial and solvency situation of their company, in particular by maintaining up to date management accounts so that they are fully aware of the financial situation of the company at all times, and if it becomes apparent that the company is unable to avoid insolvent business liquidation, then they will take action to proceed creditors voluntary liquidation asap.

The legislation governing CVLs (Creditors Voluntary Liquidation) in England and Wales is primarily outlined in the Insolvency Act 1986 and supported by the Insolvency Rules 2016. Below is an overview of the CVL process.

• Decision to liquidate. The directors of the company make a decision that the company is insolvent and cannot continue its operations or pay its debts. They convene a meeting of the shareholders to pass a special resolution to wind up the company voluntarily.
• Appointment of a liquidator. Once the resolution is passed, the directors convene a meeting of the company’s creditors. During this meeting, the creditors have the opportunity to nominate and appoint an insolvency practitioner as the liquidator. If the creditors do not nominate a different liquidator, the shareholders’ appointed liquidator typically assumes the role.
• Liquidator’s duties. The appointed liquidator takes control of the company’s affairs and assets. They collect and realise the company’s assets, investigate its financial affairs, and distribute the proceeds among the creditors according to their statutory priority. The liquidator also deals with any legal matters related to the winding up of the company.

The effect of company voluntary liquidation on a company or companies in liquidation.

Once it is decided that a company should go into liquidation, then at the point of liquidation a liquidator is appointed over the company or companies in liquidation, who will oversee the liquidation process. In almost all cases trade will immediately cease for the company or companies in liquidation.

The role of the liquidator is to liquidate assets by way of liquidation sales. The liquidator will then use the proceeds of the liquidation sales to repay creditors according to a statutory repayment priority order. Any surplus is be distributed to members, although in an insolvent creditors voluntary liquidation surplus is not usual.

Reasons to use Francis Wilks & Jones

Engaging FWJ gives you the insolvency expertise needed to guide you through the CVL process, including.

1. Expert guidance. FWJ has in-depth knowledge of the relevant legislation and regulations governing CVLs. We can provide comprehensive advice on the legal requirements, procedures, and obligations involved in the liquidation process.
2. Compliance and legal protection. FWJ can ensure that the CVL process adheres to all legal requirements, minimising the risk of potential legal challenges or complications arising from non-compliance. We can also help protect the interests of the directors and ensure they fulfil their duties in accordance with the law.
3. Negotiation and communication. Our team can act as an intermediary between the company, its directors, and the creditors during the liquidation process. We can negotiate with creditors, handle complex communications, and help facilitate a smoother resolution.
4. Maximising asset recovery. Our team is experienced in insolvency matters and can assist in identifying and recovering assets, potentially maximising the funds available for distribution to creditors. We have helped recover many millions’ pounds for liquidators over the years.
5. Legal expertise. If any legal disputes or complexities arise during the Creditor Voluntary Liquidation (CVL) process, our brilliant FWJ team can provide the necessary legal expertise and representation to address those issues effectively.
6. Friendly team. As well as being experts in our area of the law – we are also easy to get on with. It makes a huge difference when dealing with potentially stressful situations that you have a team you can work with and relate to.

Overall, engaging our experienced team at FWJ can help ensure that the CVL process is conducted in accordance with the law, the interests of the company’s stakeholders are protected and risk minimised throughout the throughout the liquidation process.

We also have 20+ years’ experience working with trusted insolvency professionals – so can help take the risk out of choosing a firm of insolvency practitioners if you need to.  We can also protect your interests as directors and minimise risk of future claims.

Any director should be aware of the consequences of liquidation – it can lead to personal claims which can be devastating. Let our brilliant team minimise risk for you.

What is a creditors voluntary liquidation?

A creditors voluntary liquidation is used by the company as a way of bringing to an end a company that has insolvency problems, which it is unlikely to recover from.

A creditors voluntary liquidation is a good way of taking control of the situation bringing about the correct and orderly winding down of the company, enabling creditors to be repaid as far as possible, and all matters dealt with before the dissolution of the company at Companies House in due course.

What happens when the company is wound up?

• The company appoints a liquidator who will take control over the company from the directors and any other persons involved. The liquidator’s role in simple terms is to collect in the assets of the company in order to distribute the proceeds of liquidation sales for the benefit of creditors and, if there is any surplus left, for the benefit of shareholders.
• The usual effect of liquidation on the company is an immediate end to trade, although this is not always the case.
• The directors remain in office during the liquidation, but their powers cease unless the liquidator particularly wants to give them powers, either full or limited. Directors must cooperate fully with the liquidator to ensure that the company is wound up properly and that creditors are paid as far as possible. There may be legal consequences for them if they don’t.
• The liquidator acts as an agent of the company, so any transactions remain in the company name during the liquidation.
• Shares in the company can’t be transferred unless the company liquidator specifically allows this.

The effect on a company’s employees

Whilst employees are not automatically dismissed in a voluntary winding up, the fact that the company has ceased trading will mean that their employment will cease. An employee can however bring appropriate claims against the company in liquidation if necessary.

Investigation of company directors

A liquidator is obliged under insolvency legislation to provide a report to the government on whether they consider that there had been any misconduct by a director of the company. If so, then it is possible that the director may be the subject of directors disqualification proceedings. If found to have been guilty of any misconduct, they could be disqualified as a director for anywhere between 2 and 15 years, depending on the conduct.

Our team are specialists at defending liquidator claims.

Prohibition on reuse of the company name

The reuse of the name of a company that is in liquidation is generally prohibited for 5 years from the date of liquidation. However, there are exceptions to this and any directors who wish to re-use the name may be able to reuse the name as long as they follow the correct statutory procedure.

• Any breach of this can incur hefty financial liabilities for the director personally or involve a custodial sentence.
• It is vital that any director who wishes to reuse a company name or to be a director in the future if they have faced disqualification take legal advice on how to do this.
• Our team at Francis Wilks & Jones frequently act for directors in this position and can help if this is needed.

Our team can avoid directors falling fowl of section 216 of the Insolvency Act 1986 and failing to gain court consent to operate a new company under a similar name as the company in liquidation. Failure to get court consent can lead to automatic director personal liability under section 217 of the Insolvency Act 1986.

The team at Francis Wilks & Jones deal with creditors voluntary liquidation on a daily basis and can advise and act for you on all aspects of a voluntary liquidation, both for the company and for the individuals concerned. Contact our team today to discuss your situation in confidence.

Creditors voluntary liquidation is a voluntary liquidation process that is brought by the directors of a company rather than the creditors – despite the name.

It is used by a company that has reached the difficult decision that it is irretrievably insolvent and that the right thing to do is to cease trading and start the orderly winding up of the company, so that creditors can be paid as far as possible out of the company’s assets.

When can a company use the creditors voluntary liquidation process?

The process is available to any company that is insolvent.

How do I start the creditors voluntary liquidation process?

The board of directors, in a general meeting will first consider whether a resolution to wind up the company is appropriate.

• if the board of directors decide that the company should go into liquidation, the company members will then pass a resolution that it be wound up.
• any floating charge holder should have written notice of the resolution of the company to wind up before the resolution is actually passed, in case they prefer to carry out one of their own enforcement options instead.
• once the resolution is passed, the company enters liquidation.
• the resolution to wind up must be advertised in the London Gazette no later than 14 days after the resolution is passed, or there can be penalties for both the company and the directors personally.
• within seven days of the resolution the directors will need to provide to all creditors what is known as a “statement of affairs” which provides full details of the company, its share capital and a summary of the assets and liabilities of the company as well as a list of the creditors. This will help creditors in reaching a decision regarding the company and the liquidator. Insolvency legislation states all the details that are required in this statement, and the team at Francis Wilks & Jones can guide you on this further in full.

The Liquidator

Both the company and the creditors can nominate a person to be the liquidator. The directors will notify the creditors of who they would like to be a liquidator and will ask the creditors to consent to this.

• within 14 days of the winding up resolution being passed the creditors should make a decision on the liquidator.
• if more than 10% in value of the creditors object to the liquidator nominated by the company, then the liquidator must call a meeting of creditors, and if the creditors decide to nominate an alternative liquidator then that liquidator takes priority over the liquidator suggested by the company.
• once the liquidator has been chosen their appointment takes effect from the date of the resolution for voluntary liquidation.

The liquidator’s role, put simply, is then to collect in the assets of the company and distribute them to creditors according to the statutory order of priority. The liquidator has very wide powers when doing this. It is the liquidator that has control of the company following the date of their appointment, not the shareholders or the directors, whose role falls away on liquidation.

If you are considering whether a creditors voluntary liquidation is the right route for your company, speak to our friendly team of experts at Francis Wilks & Jones who can talk you through the process in more detail, and whether it is the right option for you.

Unlike other methods of liquidation, a members voluntary liquidation can only be used by a solvent company. It is usually brought by the members of a company who want to end the business in an effective and orderly manner, but it is not appropriate simply to apply to the Companies Register to be struck off.
A members voluntary liquidation is commenced by the members, and the directors of that company must swear a declaration of solvency confirming that the company is able to pay all of its debts in full within 12 months at the latest. If the directors knowingly make a false declaration of solvency, this can have serious personal consequences for the directors, and will mean that the members voluntary liquidation must convert to a creditors voluntary liquidation.

Members voluntary liquidation – the voluntary liquidation process.

Once a liquidation process has commenced in a members voluntary liquidation, the liquidation process is much the same as with insolvent liquidations. A liquidator is appointed whose role is to collect in the company’s assets, liquidate assets, distribute the proceeds and terminate the company.

• once a liquidator is appointed, then the directors’ powers end and the liquidator deals with all company matters during the voluntary liquidation process.
• the liquidator will inevitably bring liquidation sales in order to liquidate assets of the company.
• once the proceeds of sale have been received by the liquidator, the voluntary liquidation process means that the liquidator will distribute the proceeds of the assets in the liquidation of the company. She/he will first pay any creditors that are still outstanding, before applying the proceeds of liquidation sales for the members who will be paid in accordance with their shareholding.

It is hoped that a members voluntary liquidation will be a quick and efficient way of winding down a company. However, if the liquidation has to take longer than a year, a liquidator must file an annual report for creditors and members of the company in order to update them on the progress of the liquidation of the company.

What is a strike off?

Any solvent company can apply to Companies House to be struck off the Register of Companies and dissolved. This may be required if the company business is no longer viable, or the company has fulfilled its purpose and is no longer required, or following some sort of reorganisation by a parent company who decides that that company can be struck off the register as it is no longer needed.

• for a company to use the strike off procedure, the company’s affairs should be very straightforward.
• the company cannot use strike off if it is insolvent. An insolvent company should look at one of the liquidation methods such as creditors voluntary liquidation or compulsory liquidation in order to go into liquidation to bring about the end of the company properly.
• the voluntary strike off route could only be used if the company’s affairs can be closed down quickly, and simply, meaning that its assets are distributed and there are no creditors to be repaid now or in the future.

What is a members voluntary liquidation?

Members voluntary liquidation is often used more frequently than voluntary striking off in order to bring about an orderly end to a company using the liquidation process.

In a members voluntary liquidation the members will appoint a liquidator who will oversee the company liquidation, liquidate assets, make distributions to creditors and to shareholders, and then bring about the dissolution of the company from Companies House.

Advantages of a members voluntary liquidation

Whilst the liquidation cost of a members voluntary liquidation is generally higher than a dissolution or strike off, this is still a better option if

• the company has any sort of trading history or is still trading.
• there are claims from creditors that still need to be settled.
• there are liabilities in the company.
• assets may be greater than liabilities and the distribution may be complicated.

Advantages of striking off

If the company that wishes to come to an end and is dormant or has ceased trading some time ago and there are little remaining assets and no liabilities in the company, then striking off may be more advantageous in that it is cheaper a members voluntary liquidation.

However, there is a risk of comeback later if the company is not wound up using the benefit of a liquidator, so the company should be very sure that dissolution is the correct procedure for them before embarking on it.

Our insolvency and company rescue team can help advise on all the different types of insolvency and restructuring options. Call us today for immediate help.

Compulsory liquidation is a process in England and Wales where a company is liquidated by a court order, typically initiated by a creditor or the company itself. It is a legal procedure used when a company is unable to pay its debts and is considered insolvent.

It is most often used as a forceable company liquidation process by a creditor of a company who is owed money, who finds that the only way they can obtain repayment of that money is by putting that company into compulsory liquidation.
It is possible for others such as the company itself or for shareholders of the company to use the compulsory liquidation process, but this is more unusual.

The legislation governing compulsory liquidation in England and Wales is primarily outlined in the Insolvency Act 1986, along with relevant provisions in the Insolvency Rules 2016.

Compulsory liquidation – the winding up procedure

Compulsory liquidation is commenced by a petition for winding up being filed in court. A creditor may issue a petition for company liquidation on one of the following grounds:

• they have served a statutory demand and the 21 day period for payment or response has expired.
• they have an enforcement or execution process following a judgment which is unsatisfied.
• they are able to prove to the court that the company is unable to pay its debts as and when they fall due, or that the company is balance sheet insolvent.

To liquidate a company and to start the liquidation process, you must be owed a minimum of £750.

Whilst a statutory demand is not necessary before issuing a winding up petition, it is usually a good idea for a creditor to serve a statutory demand before liquidating a company as this is a good way of proving that they have an outstanding debt.

The winding up petition must be in a prescribed form in order to bring about the liquidation of a company.

• there are rules for service of the petition when liquidating a company, and all of these rules must be followed correctly for a successful company liquidation order to be made.
• the petition will be advertised in the London Gazette before the hearing in court. This notifies other interested creditors, and has the negative consequence that it makes everyone aware of the company’s possible financial difficulties which can have an effect on trade and/or financing. All banks review the London Gazette daily for notices of company liquidation petitions, and they may freeze a company’s bank account until the company liquidation hearing has taken place. This can have serious consequences for a company wanting to continue to trade.
• If the court is satisfied that the company is insolvent it may issue a winding-up order. The winding up order officially places the company into compulsory liquidation and appoints an Official Receiver or an insolvency practitioner as the liquidator.

It is therefore absolutely vital not to ignore a liquidation/winding up petition served on you, as not only may this lead to company liquidation, but even if dismissed, in the meantime the notice can have serious consequences on your ability to trade.

Liquidator’s duties in a compulsory liquidation

The appointed liquidator takes control of the company’s affairs, collects and sells its assets, and distributes the proceeds to the creditors according to their statutory priority. The liquidator also investigates the company’s financial affairs, including any misconduct by directors, and reports to the court.

Reasons to instruct the team at FWJ

Engaging FWJ means you are working with a law firm specialising in insolvency and corporate law. Amongst the benefits during a compulsory liquidation are:

1. Legal expertise. FWJ has in-depth knowledge of the relevant legislation and case law governing compulsory liquidation – built up over 20+ years. We can provide expert advice on the legal requirements, procedures, and obligations involved in the process.
2. Friendly to work with. We have built a team of friendly and skilled lawyers. We have many decades’ combined experience helping business owners, directors and SME’s on insolvency related matters. We understand these situations are stressful – and we can help reduce that stress and guide you to the best outcome
3. Court representation. Compulsory liquidation involves court proceedings, and FWJ can arrange for representation for the company or its directors in court. We can handle the necessary filing of legal papers, attend hearings, and present arguments on behalf of our clients if required.
4. Protection of directors’ interests. Directors may face personal liabilities and potential liquidator claims during the liquidation process. Our fantastic team regularly advises directors on their legal rights, obligations, and potential defences, helping to protect their interests and minimising personal liability and claims for repayment in to the liquidation. Defending liquidator claims is a speciality of ours.
5. Creditor negotiations. Our team can negotiate with creditors on behalf of the company or its directors, seeking to reach agreements and settle outstanding debts. They can help navigate complex creditor relationships and potentially achieve more favourable outcomes.
6. Compliance and documentation. Compulsory liquidation involves various legal requirements and documentation being prepared and filed. Our team can help ensure compliance with these requirements, assist in the preparation of necessary documents, and help navigate any legal complexities that may arise. Using FWJ can minimise the risk of things going wrong.
7. Asset recovery. FWJ’s experienced lawyers can assist in identifying and recovering assets, potentially maximising the funds available for distribution to creditors, especially if the company money has been wrongfully removed. We regularly recover many thousands of pound via our excellent debt recovery team.

Our professional team at FWJ will provide valuable legal expertise, representation, and guidance throughout the entire compulsory liquidation process. With our team of trusted advisers (such as accountants and Insolvency Practitioners built up over 20+ years). We can help ensure compliance with the law, protect the interests of the company’s stakeholders, and provide effective advocacy, reduce risk, help directors and give support in any court proceedings.

Director & Shareholder Responsibilities

When a company goes into liquidation in England and Wales, directors can be affected in several ways. Here’s how liquidation can impact directors, along with eight top tips for directors facing liquidation to reduce the risk of personal claims after the liquidation process:

1. Duties and obligations. Directors must continue to act in the best interests of the company and its creditors throughout the liquidation process. They have a duty to cooperate with the appointed liquidator and provide all necessary information and assistance.
2. Personal liability. Directors may face personal liability if they have engaged in wrongful or fraudulent trading, breached their fiduciary duties, or acted in a manner that knowingly disadvantaged creditors. Personal liability can lead to claims seeking to recover losses incurred by the company or its creditors.
3. Misfeasance claims. Directors can be subject to misfeasance claims if their actions or decisions prior to liquidation are deemed to have caused a loss to the company or its creditors. Misfeasance claims can seek to recover the loss caused by the director’s misconduct.
4. Director disqualification. If the conduct of directors is found to be unfit, they may face director disqualification from acting as directors for a specified period. Disqualification can have serious ramifications on a director’s ability to participate in the management of other companies without formal permission of a court.
5. Director investigations. A liquidator has the power to investigate the conduct of directors, including their actions leading up to the liquidation. The liquidator may report any misconduct or wrongful behaviour to regulatory authorities, potentially resulting in further investigations or actions.
6. Asset realisation. Directors may need to assist the liquidator in identifying and realising company assets for the benefit of creditors.
7. Legal obligations. Directors are still subject to their legal duties and obligations during the liquidation process, including providing information to the liquidator and attending meetings as required.
8. Impact on reputational and future directorship. Directors’ involvement in a liquidated company can have an impact on their reputation and future prospects of holding directorship roles.
9. Personal guarantees claims. Directors may be personally liable for any guarantees or security provided for company debts, which may be called upon during the liquidation process.

Whatever the type of claim or investigation you are facing, our brilliant team at FWJ can help. Call us today.

How does liquidation affect directors?

When a company goes into liquidation in England and Wales, directors can be affected in several ways. Here’s how liquidation can impact directors, along with eight top tips for directors facing liquidation to reduce the risk of personal claims after the liquidation process:

1. Duties and obligations. Directors must continue to act in the best interests of the company and its creditors throughout the liquidation process. They have a duty to cooperate with the appointed liquidator and provide all necessary information and assistance.
2. Personal liability. Directors may face personal liability if they have engaged in wrongful or fraudulent trading, breached their fiduciary duties, or acted in a manner that knowingly disadvantaged creditors. Personal liability can lead to claims seeking to recover losses incurred by the company or its creditors.
3. Misfeasance claims. Directors can be subject to misfeasance claims if their actions or decisions prior to liquidation are deemed to have caused a loss to the company or its creditors. Misfeasance claims can seek to recover the loss caused by the director’s misconduct.
4. Director disqualification. If the conduct of directors is found to be unfit, they may face director disqualification from acting as directors for a specified period. Disqualification can have serious ramifications on a director’s ability to participate in the management of other companies without formal permission of a court.
5. Director investigations. A liquidator has the power to investigate the conduct of directors, including their actions leading up to the liquidation. The liquidator may report any misconduct or wrongful behaviour to regulatory authorities, potentially resulting in further investigations or actions.
6. Asset realisation. Directors may need to assist the liquidator in identifying and realising company assets for the benefit of creditors.
7. Legal obligations. Directors are still subject to their legal duties and obligations during the liquidation process, including providing information to the liquidator and attending meetings as required.
8. Impact on reputational and future directorship. Directors’ involvement in a liquidated company can have an impact on their reputation and future prospects of holding directorship roles.
9. Personal guarantees claims. Directors may be personally liable for any guarantees or security provided for company debts, which may be called upon during the liquidation process.

Whatever the type of claim or investigation you are facing, our brilliant team at FWJ can help. Call us today.

What must the directors and shareholders do in a compulsory liquidation?

It is vital for both directors and shareholders to understand their roles and responsibilities if a company goes into liquidation. Our expert legal advice help minimise the risk of personal claims and reduce potential losses. Call us today.

Shareholders

In a compulsory liquidation the company is insolvent. As such

• the shareholders will no longer have control over the company. All control passes instead to the liquidator and the creditors. This can be contrasted with a members’ voluntary liquidation, which is a solvent liquidation where the shareholders can appoint their own liquidator;
• in an insolvent liquidation, such as compulsory winding up, then the creditors’ rights are paramount, not the shareholders;
• it is no longer possible for shares in that company in liquidation to be transferred unless shareholders can obtain consent of the liquidator. Shareholdings must remain in place.

In any insolvent liquidation process such as compulsory liquidation, all the assets are gathered for the company and are used to pay the creditors owed money by the company. Because the company is insolvent it is unlikely that there will be enough money to repay all creditors including interest. As a result, it is unusual in an insolvent liquidation that shareholders will receive any of their shareholding back. However, this is not unheard of. For example, in the Lehmans liquidation, assets collected were enough to repay all creditors with a surplus back to the shareholders. This is however quite an unusual situation.

Directors position on a compulsory liquidation

As soon as the company is wound up by the court, it ceases to trade, and a liquidator is appointed over the company.

• once a winding up order has been made and the liquidator appointed, the directors’ role is ended. They can no longer dictate what happens within the company;
• however, it is very important that directors cooperate with the liquidator in the liquidation. It is only the directors who will know the full details of the company’s “ins and outs” and it is important that they liaise with the liquidator to help them gather in assets in order to repay creditors;
• a liquidator must, by law, make a report on the conduct of directors. This relates not only to the conduct of directors when they ran the company prior to the winding up order, but also extends to their conduct following and during the liquidation.
• lack of cooperation with the liquidator and hiding assets and paperwork can lead to a director facing disqualification as a company director for anywhere between 2 and 15 years, depending on the magnitude of the misconduct.

In any event, directors retain duties over the company and should be willing to help the liquidation to be completed as quickly as possible, which usually means with less expense, and to allow for creditors to be paid as far as possible. This can benefit directors who may wish to continue to trade with particular creditors in the future by maintaining goodwill.

Contact our team today

Our brilliant team has been helping directors and shareholders for over 20 years. We understand how to minimise risk and maximise return when facing insolvent situations. We can also help deal with any enquiries by the liquidator and make sure you don’t inadvertently make your personal position worse.

What happens to contracts when a company goes into liquidation?

When a company goes into liquidation, the fate of its contracts is governed by the Insolvency Act 1986. The liquidator’s duties and the enforceability of contracts depend on the type of liquidation and the terms of the contracts. Here’s an overview of what happens to contracts during liquidation and the protection afforded to creditors:

• Liquidator’s duties. The liquidator, whether appointed in a creditors’ voluntary liquidation (CVL) or a compulsory liquidation, has a duty to gather and realise (sell) the company’s assets for the benefit of its creditors. This includes reviewing the company’s contracts to assess their value and determine the appropriate course of action.
• Contracts determination. When a company enters liquidation, the liquidator reviews the company’s contracts to determine whether any monies are still owing under them for goods or services supplied by the company prior to formal liquidation. If so – the liquidator may take action to collect that money in the interests of the creditors.
• Enforceability of contracts:  Contracts entered into with the company by a creditor before liquidation are not enforceable and any creditor owed money from the company must submit a Proof of Debt to the liquidator setting out the amount of money it is owed.  By doing this, the creditor might recover some money in due course if the liquidator makes realisations into the insolvent company.  However, in reality, this is unlikely to happen as often not much is recovered by the liquidator and there might be preferential creditors to pay out in front of the unsecured creditors.  

What happens when a company goes into administration?

When a company goes into liquidation in England and Wales, the process and the duties of the liquidator are governed by the Insolvency Act 1986. Here’s an overview of what happens when a company goes into liquidation and the duties of the liquidator.

Appointment of a liquidator. The company may enter liquidation voluntarily through a creditors’ voluntary liquidation (CVL) or involuntarily through a compulsory liquidation ordered by the court. A licensed insolvency practitioner is appointed as the liquidator to oversee the winding-up process.

Duties of the liquidator. The liquidator has several key duties, including.

1. Investigation of company affairs. The liquidator is responsible for investigating the company’s affairs, transactions, and financial records to determine the reasons for its insolvency and any potential misconduct or fraudulent activity by the directors.
2. Realisation of company assets. The liquidator’s primary duty is to gather and realise the company’s assets, which may involve selling or disposing of assets to generate funds for distribution among the company’s creditors.
3. Distribution of funds. The liquidator distributes the realised funds to creditors in accordance with the prescribed hierarchy of payments set out in the Insolvency Act 1986. Secured creditors and certain preferential creditors have priority over unsecured creditors.

Action against former directors. If the liquidator identifies instances of wrongful or fraudulent trading, misfeasance, breach of fiduciary duty, or other misconduct on the part of the former directors, they can take legal action against them to recover funds or seek compensation. The liquidator may pursue claims such as:

1. Misfeasance claims. The liquidator can bring misfeasance claims under Section 212 of the Insolvency Act 1986, seeking a court order for the directors to repay, restore, or contribute to the company’s assets.
2. Wrongful & fraudulent trading claims. If the directors continued to trade when they knew or ought to have known that the company had no reasonable prospect of avoiding insolvent liquidation, the liquidator can bring a wrongful or fraudulent trading claim under Section 214 of the Insolvency Act 1986. The court may order the directors to make a contribution to the company’s assets.
3. Director disqualification proceedings. If the directors’ conduct is found to be unfit, the Secretary of State can commence disqualification proceedings under the Company Directors Disqualification Act 1986. This may result in the directors being disqualified from acting as directors for a specified period.

The specific actions taken by the liquidator and any potential claims against former directors will depend on the circumstances and findings of the investigation. Seeking our expert advice together with our associated links to experienced insolvency practitioner firms is crucial to ensure compliance with the legislation, protect the rights of creditors, and hold directors accountable for any misconduct or breaches of their duties.

What happens after liquidation?

After the liquidation process is completed in England and Wales, several actions are taken to conclude the affairs of the company. The duties of the liquidator, as outlined in the Insolvency Act 1986, govern these post-liquidation processes.  Set out below are the main activities.

• Finalising the liquidation. The liquidator’s primary duty is to wind up the company’s affairs, which includes completing the sale of assets, resolving any outstanding legal issues, and distributing the funds to creditors.
• Final accounts and reports. The liquidator prepares final accounts and reports, including a Statement of Affairs, which details the company’s assets and liabilities. These reports are submitted to the Registrar of Companies and, in some cases, to the Insolvency Service.
• Discharge of the liquidator from office. Once the liquidator has completed the liquidation process and fulfilled their duties, they seek discharge from the court. The discharge releases the liquidator from any further liability and concludes their role in the liquidation.
• Dissolution of the company. After the liquidation process is finalised, the company is dissolved, meaning it is removed from the register at Companies House. The company ceases to exist legally.

The duration of the liquidation process can vary depending on the complexity of the case, the size of the company, and any potential legal disputes or investigations. The time frame can range from several months to several years. It is difficult to provide a specific duration as each liquidation case is unique.

During the liquidation process, the liquidator must comply with their statutory duties, which include.

• Collection and realisation of assets. The liquidator must gather and sell the company’s assets, ensuring they are properly valued and marketed to achieve the best possible price.
• Investigation of company affairs. The liquidator investigates the company’s affairs to identify any potential misconduct, fraudulent activity, or instances of wrongful trading by the directors. This includes reviewing financial records, transactions, and the conduct of directors.
• Distribution of funds. The liquidator distributes the funds realised from the sale of assets to the company’s creditors in accordance with the prescribed hierarchy of payments set out in the Insolvency Act 1986.
• Reporting and record keeping. The liquidator is responsible for maintaining accurate records, preparing financial statements, and submitting reports to the relevant authorities.

It is important to note that the liquidation process can be complex and involve legal and financial intricacies. Seeking the assistance of an experienced insolvency practitioner or a professional law firm specialising in insolvency matters is highly recommended to ensure compliance with the legislation, efficient handling of the process, and timely resolution. 

How long does it take to liquidate a company?

There are two types of voluntary liquidation method. Members voluntary liquidation and creditors voluntary liquidation.

1. A members voluntary liquidation is instigated by the members of a solvent company in order to appoint a liquidator to liquidate the assets of the company or companies in liquidation by way of liquidation sales, so that the proceeds of the liquidation sales can be distributed amongst the members in accordance with their shareholding, and the company removed from the Companies Register.
2. A creditors voluntary liquidation is an insolvent liquidation process. Creditors liquidation is instigated by the company itself and will be used when the company finds that it is either unable to pay its debts as and when they fall due or it is balance sheet insolvent and there is no other option for the company but to go into creditors liquidation. It will also eventually be removed from the Companies Register.

In both members voluntary liquidation and creditors voluntary liquidation a liquidator is appointed over the company or companies in liquidation. The liquidator oversees the company liquidation process and is responsible for collecting in the assets of the company and distributing these.

• In a members voluntary liquidation there will typically be less creditors owed money than in a creditors liquidation. It is therefore usually more straightforward, and therefore faster, in a members voluntary liquidation to pay the creditors owed and then distribute the surplus to the members by way of the statutory order.
• In a creditors liquidation, there can be any number of creditors who need to make a claim in the liquidation of a company in order to be repaid. The liquidation process for the liquidator can take quite some time in finding out who are the creditors of the company or companies in liquidation, and how much they are owed. Once the liquidator has determined all the monies owed by the company to creditors, then it will take some time to distribute the proceeds of liquidation sales to those creditors following the statutory ranking order which a liquidator of a company liquidation must follow

The answer therefore to how long does voluntary liquidation take is it will be very much dependent on the company, the complexity of its creditor situation and the complexity of its financial circumstances.

The expert team of liquidation lawyers at Francis Wilks & Jones act in voluntary liquidations on a daily basis and are mindful that this can be a stressful process that should be undertaken as quickly as possible. If you would like to discuss your own company’s situation with an expert in our team contact us today.

What does a liquidator of a company do?

An insolvency practitioner can be appointed over formal insolvency proceedings such as compulsory liquidation. A liquidator is a licensed insolvency practitioner who is subject to oversight by their professional body.

A liquidator usually comes from either an accountancy or a legal background but must pass specific insolvency exams in order to become an insolvency practitioner. From then on, they are still subject to authorisation from their professional body and must continue their learning throughout their career.

Responsibilities of a liquidator

A liquidator is the person appointed over a company when it goes into liquidation. They have the responsibility for

• collecting in all of the assets of the company;
• as part of the liquidation process, will bring about liquidation sales in order to make sure that those assets are available to be distributed to the creditors of the company.
• if there is any surplus then money will go back to the shareholders.

The liquidator acts as an agent for the company, so the company’s assets don’t vest in them. They can ask the court for a particular asset to vest in them if necessary, but this is rarely needed as they have extremely wide powers to deal with all of the company’s property.

A liquidator will liaise with the directors and shareholders throughout the process of compulsory liquidation. However, once the company goes into liquidation then the directors no longer have any power over the company, and the liquidator makes decisions about the company, sometimes with the consent of creditors where necessary.

It is to the benefit of both the liquidator and the directors that they maintain a good working relationship so that the liquidator is provided with all of the company information, so that they can bring about the collection and distribution of the assets of the company and deal with all matters in the best possible way.

What happens if I don’t like my liquidator or think that they are not acting in the best interest of the company and creditors?

If you have a complaint against a liquidator then you can apply to the court if the liquidator is breaching their statutory duty. The court has very wide powers to make any order it thinks fit if it finds against the liquidator.

For example, it is possible to challenge to how much the liquidator is paid. If the court agrees that the liquidator’s remuneration is excessive or is not clear enough then they can make an order to alter it.

• it should be noted however that the vast majority of licensed insolvency practitioners act in a professional manner and in the best interest of the creditors;
• therefore while there may be some decisions that directors won’t agree with, this does not mean that the liquidator is not acting under their duty of care to the creditors generally.

Challenging a liquidator is not easy and should only be considered if the evidence is very strong. courts are reluctant to interfere with a liquidator carrying out their role. As you can imagine, the job of liquidator is not easy or popular. They will not be familiar with the company in the same way that its officers have been, and their role is to protecting the creditors as a whole, not individual interests.

If you would like more details on the role of the liquidator, if you are considering company liquidation, or if your company is in liquidation and you are concerned about a liquidator, then call our friendly team of experts at Francis Wilks & Jones to talk through your concerns.

Eight tips for directors facing company liquidation

It is crucial for directors facing liquidation to consult with professionals and seek tailored advice based on their specific circumstances. Compliance with legal obligations, transparency, and cooperation with the liquidator are key to minimising the risk of personal claims after liquidation.

Cheapest way to liquidate a company

In England and Wales, the cheapest way to liquidate a company is typically through a process known as Creditors’ Voluntary Liquidation (CVL). This is a voluntary liquidation initiated by the company’s directors and shareholders.

It is hard to be precise on the actual cost – as every situation is different.  However, there will be set court fees to wind up the company – and these are usually in the region of £2600.  We would also recommend you take legal advice to make sure you complete the process properly and do not inadvertently open up the directors or management to personal claims from the liquidator later on.

Set out below are some other general observations about the process and areas which might attract cost and fees.  We are more than happy to talk to you about the right process for you.

• Creditors’ Voluntary Liquidation (CVL). In a CVL, the directors and shareholders decide to wind up the company’s affairs and appoint a licensed insolvency practitioner as the liquidator. The liquidator’s fees will be paid from the company’s assets, and the costs are generally less compared to other liquidation procedures.
• Always seek professional assistance. It is highly advisable to engage the services of an experienced insolvency practitioner and/or a law firm specialising in insolvency matters. At FWJ we have a brilliant team of insolvency lawyers who have 20+ years’ relationships with Insolvency Practitioners and other professionals.  We can help take the risk out of the process and also deliver the most appropriate cost-effective options for you.
• Consider informal arrangements. In certain situations, it may be possible to negotiate informal arrangements with creditors, such as extended payment terms or reduced debt amounts. This can help alleviate the financial strain on the company and potentially avoid the need for formal insolvency procedures.  We would again recommend you take our advice on this as you might be in danger of inadvertently trading the company whilst insolvent – and this could lead to a range of personal claims against the directors if it later goes into liquidation.
• Company Voluntary Arrangement (CVA). A CVA is a formal agreement between the company and its creditors to repay debts over a specified period. This can provide an opportunity to restructure the company’s debts, reduce costs, and continue trading under a more manageable financial arrangement. Again – we can help introduce you to the right insolvency practitioner and take the risk out of choosing the wrong one.
• Administration. In some cases, entering into administration may be a more suitable option than liquidation. Administration allows for the restructuring of the company’s affairs to maximise returns to creditors or facilitate a sale of the business as a going concern. However, administration costs can be higher than a CVL – but it can also mean the company ultimately survives. Our team can advise if Administration is right for you.
• Financial restructuring. Assessing the company’s financial situation and exploring options for restructuring, refinancing, or securing additional funding may help alleviate the need for immediate liquidation. We have expert links to restructuring experts – and can put you in touch for you to decide whether to use them or not.
• Informal negotiations with creditors. Open and transparent communication with creditors, explaining the company’s financial difficulties, and proposing reasonable repayment plans can sometimes lead to mutually agreeable arrangements – and avoid formal insolvency. We have an expert team who can help with this.
• Legal advice and support. Our team of experts can provide you with legal and practical advice which is right for your company.  Our ethos is to try and help business owners rescue their companies – but if this is not possible, to help guide them down the most appropriate form of insolvency process.

It’s important to note that the cheapest way to liquidate a company may vary depending on the individual circumstances and the complexity of the financial situation. By speaking to our team at FWJ – you can draw on decades’ combined experience and find the right solution for your particular circumstance.

Call us today – free of charge.

Can you start a new business after liquidation?

After a company has gone into liquidation in England & Wales, directors are generally allowed to start a new business. However, there may be certain restrictions or considerations to keep in mind.

• Director disqualification. If a director’s conduct during the liquidation process or the affairs of the previous company is found to be unfit, they may face disqualification from acting as a director for a specified period. Disqualification proceedings can be initiated under the Company Directors Disqualification Act 1986. It is important to note that disqualification is a serious matter and can have significant implications for a director’s ability to manage or be involved in the management of a company. Our expert team regularly assist on director disqualification claims – and can even help banned directors get permission to be a director again.
• Bankruptcy. In some cases, directors may be made bankrupt (eg failing to pay a personal guarantee). In these cases, it is not possible to act as a director whilst the bankruptcy order remains in place. We have a specialist personal insolvency and bankruptcy team who can help.
• Reusing a company name. If the previous company went into liquidation and had a similar name to the new company, there are restrictions on reusing the same or a similar name. The provisions governing the reuse of company names are outlined in the Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015. It is important to consult legal advice to ensure compliance with these regulations.
• Disclosure of previous insolvency. When starting a new company, directors are generally not required to disclose their previous involvement in an insolvent company. However, there are exceptions where directors may need to disclose their previous insolvency, such as when seeking certain professional qualifications or if specifically requested by a creditor or business partner.
• General director responsibilities and fiduciary duties. Directors of the previous company have a responsibility to act in the best interests of the new company and its stakeholders. They must fulfil their fiduciary duties and ensure compliance with the Companies Act 2006 and other applicable laws and regulations.

It is advisable for directors to seek legal advice from a professional law firm specialising in insolvency and company law to understand any specific restrictions or considerations based on their individual circumstances. Professional guidance can help ensure compliance with the relevant legislation and mitigate any potential risks or complications when starting a new business after liquidation.

Can a company in liquidation still trade?

In England and Wales, once a company is in formal liquidation, it cannot continue to trade.

The liquidation process is initiated to wind up the company’s affairs and distribute its assets to creditors.

The specific provisions governing a company’s ability to trade during liquidation are outlined in the Insolvency Act 1986.

• Compulsory Liquidation. In the case of compulsory liquidation (following the making of a winding up order at court) the company’s ability to trade is stopped once the winding-up petition is granted by the court. Indeed, the directors and management need to be very careful about trading the company at all between the petition being issued at court and the final winding up order being made. If payments to creditors and other parties are made during this period, it can lead to personal claims by the liquidator for repayment of those monies.
• Creditors’ Voluntary Liquidation (CVL). In a CVL, the directors initiate the liquidation voluntarily. Although the company can technically continue trading until the appointment of a liquidator, it is generally advisable to cease trading as soon as the decision to liquidate is made or at the least – take professional legal and insolvency advice to minimise the risk of any future claims by the liquidator – eg trading whilst insolvent. This is because the directors have a duty to act in the best interests of the company’s creditors once insolvency is acknowledged.

Can a liquidation be reveresed?

In England and Wales, once a company has entered liquidation, it is generally difficult to reverse the process. The liquidation process is intended to wind up the affairs of an insolvent company and distribute its assets to creditors. However, there are limited circumstances where it is possible to apply to the court to have the liquidation reversed or to obtain an order for the company’s restoration.

The relevant provisions governing the reversal of a liquidation are primarily found in the Insolvency Act 1986.

• Reversal of the compulsory liquidation. If the company was placed into compulsory liquidation by a court order, the court has the discretionary power to set aside or vary the winding-up order under Section 127 of the Insolvency Act 1986. This may be done upon application by an interested party, such as a creditor or a shareholder, if they can demonstrate a valid reason for the reversal. Examples of valid reasons may include a material irregularity in the winding-up process or the discovery of new evidence that would have influenced the court’s decision.
• Restoration of a dissolved company. The restoration of a company is a separate process from reversing a liquidation. It involves bringing the company back into existence after it has been dissolved following the completion of the liquidation process. Restoration can be sought under Section 1029 of the Companies Act 2006. There are two main routes for restoration.
• Administrative restoration. This route applies if the company was dissolved less than six years ago and the application for restoration is made by a former director, member, or creditor. The application is made to the Registrar of Companies and typically requires the submission of certain documents and the payment of a fee.
• Court ordered restoration. If the administrative restoration route is not available or the application is opposed, an interested party can apply to the court for an order to restore the company. This may be done within 20 years from the date of dissolution. The court will consider various factors and may require a hearing to determine if restoration is appropriate.

What happens to employees when a company goes into liquidation?

When a company goes into liquidation in England and Wales, the fate of employees is governed by specific legislation, primarily the Insolvency Act 1986 and the Employment Rights Act 1996.

• Redundancy payments. Employees who are made redundant as a result of the company’s liquidation may be eligible for statutory redundancy payments. These payments are administered by the Redundancy Payments Service (RPS), an executive agency of the UK government. The RPS pays eligible employees the redundancy entitlements they are owed, subject to certain limits set by legislation.
• Protection of employees. Employees have certain protections in the event of their employer’s liquidation. The Redundancy Payments Act 1965 and the Employment Rights Act 1996 provide safeguards to ensure employees receive the redundancy payments they are entitled to.
• Duties of the liquidator. The liquidator appointed to oversee the company’s liquidation has certain responsibilities towards the employees. Their duties include:
  • Informing employees. The liquidator must inform the employees of the liquidation and its implications for their employment.
  • Cooperation with Redundancy Payments Service. The liquidator is required to cooperate with the Redundancy Payments Service in assessing the redundancy entitlements of employees and providing the necessary information and documentation.
  • Employee claims. The liquidator must notify employees of their rights to make claims for redundancy payments and other unpaid wages or entitlements.
  • Employee representatives. The liquidator may need to engage with employee representatives, such as trade unions or employee-elected representatives, to ensure proper communication and consultation during the liquidation process.
  • Redundancy Payments Scheme. In some cases, if the company is unable to pay the redundancy payments owed to employees, they may be able to make a claim to the National Insurance Fund through the Redundancy Payments Scheme. The scheme provides a safety net to ensure employees receive their statutory redundancy entitlements even if the employer is insolvent and unable to pay.

Can I be a director of a company after liquidation?

We get asked this question a lot.

In England and Wales, it is generally possible to become a director of a new company after a previous company has gone into liquidation. There are no specific legal restrictions that prevent an individual from acting as a director solely based on their involvement in a liquidated company.

However, there are certain considerations to keep in mind.

1. Director disqualification. If a director has been disqualified by a court order under the Company Directors Disqualification Act 1986 (CDDA 1986) or any other relevant legislation, they will be prohibited from acting as a director for a specified period – anything between 2 – 15 years. Disqualification can be imposed for various reasons, such as wrongful or fraudulent trading, unfit conduct, or persistent breaches of directorial duties. The only way to remedy this is to get permission from the court to remain a director despite the disqualification order. This is something we can help with.
2. Reusing company names. If a company has gone into liquidation, there are restrictions on reusing the same or a similar company name within a certain period. The legislation aims to prevent the misuse of company names and protect creditors and the public from potential confusion. Failure to comply with section 216 of the Insolvency Act and seek court permission to reuse a company name – can lead to personal liability claims under section 217 of the Insolvency Act 1986. We can guide you through this important process.

While it is generally possible to become a director after liquidation, it is important to ensure compliance with the law and maintain good corporate governance practices. Directors should act responsibly, fulfil their legal obligations, and avoid any conduct that could raise concerns about their fitness to act as directors.