What is voluntary liquidation?
A limited company can only be voluntary liquidated by its shareholders. The appointed liquidator must be an authorised licensed insolvency practitioner.
How do I liquidate my company?
There are two types of voluntary liquidation:
Creditors’ Voluntary liquidation (CVL)
This is when the company’s shareholders decide to liquidate, but there aren’t enough assets to pay the creditors in full. i.e. the business is insolvent. The liquidation begins at the time of approval of the resolution.
If most directors do not declare solvency or insolvent, the shareholders can still vote for voluntary liquidation, referred to as a creditors’ voluntary liquidation.
So to vote on voluntary liquidation, shareholders must carry out:
- holding a general meeting of the company and
- pass a resolution for voluntary winding up.
The directors on behalf of the company can nominate a licensed insolvency practitioner as a liquidator. It also needs to hold a creditors meeting (usually on the same day as the shareholders’ meeting) to obtain its financial affairs. However, creditors can nominate a liquidator, and their nomination usually overrides the shareholders, if different.
Members’ Voluntary liquidation (MVL)
A Members Voluntary Liquidation is when the company’s shareholders vote to liquidate its assets to pay all the debts. That is, the company is solvent.
A Members’ Voluntary Liquidation MVL applies only to a solvent company. The directors must make a formal declaration of solvency, which must:
- Be made by a majority of directors on a date no more than five weeks before passing the resolution for voluntary winding up.
- Filed at Companies Registry
- State that the directors have made a full inquiry into the company’s affairs and believe the company can pay its debts and interest within a maximum of 12 months.
- Include an up-to-date statement of the company’s assets and liabilities.
It is a criminal offence to declare solvency without reasonable grounds.
The shareholders must hold a general meeting of the company that passes a resolution for:
- voluntary winding up
- appointing one or more liquidators of the company
The shareholders must pass a special resolution for winding up, unless:
- The company resolves that it cannot continue its business because of its liabilities when an extraordinary resolution is required.
- The articles of association of the company provide that it be dissolved at a specific time or following a particular event when an ordinary resolution is required.
If the company is insolvent, the liquidator will call a meeting of creditors, and the liquidation becomes a creditors’ voluntary liquidation.
What happens when a limited company enters voluntary liquidation?
The appointed liquidator assumes control of the company’s affairs, and almost all directors’ powers cease.
The liquidator realises all company’s assets to enable eventual distribution—minus liquidation costs to creditors.
Members’ voluntary liquidation (MVL)
In a member’s voluntary liquidation, the liquidator must hold a company meeting each year and provide details of their actions, dealings, and the conduct of the winding up in the preceding year.
Creditors’ voluntary liquidation (CVL)
In a creditors’ voluntary liquidation, the liquidator must hold annual creditors’ meetings for the same purpose. In all cases, the liquidator must submit a confidential report to the Secretary of State on the conduct of every person who served as director or shadow director in the last three years before the liquidator was appointed.
After the liquidation of the company, the liquidator holds the final meeting of its creditors.
What are the duties of a company director in voluntary liquidation?
In a voluntary liquidation, directors must:
- Impart information about the company’s affairs to the liquidator, and attend interviews with the liquidator if and when necessary.
- Take care of the company’s assets and hand them over to the liquidator, together with all its books, records, bank statements, insurance policies and other documents related to its assets and liabilities.
When will the voluntary liquidation end?
A liquidation completes once dissolution has taken place after the liquidator’s final meeting.
How long the liquidation takes depends on the circumstances of the individual case (e.g. the nature of the assets involved). So, once the process completes, the company is dissolved and ceases to exist.
Contains public sector information licensed under the Open Government Licence v3.0.