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The quick answer

When a limited company is insolvent it can be wound up using a Creditors Voluntary Liquidation where you chose an insolvency practitioner like us to act as liquidator. Alternatively a company can also be wound up by the Court. The Court route is used for companies with very few assets or when a company is wound up by an unpaid creditor. 

In more detail

The Creditors Voluntary Liquidation process

A limited company is a separate legal entity in its own right. When it gets to the end of its useful life or can no longer carry on trading due to its debts, it can be dealt with by winding up. This effectively will get rid of the company.

There are two main ways to wind up a company. One is to ask a Licensed Insolvency Practitioner, like us, to assist the directors in calling the meeting of shareholders and creditors and passing the resolutions to liquidate. This takes about 8 days up to 2 weeks. Once the company is in liquidation we would act as the liquidator and realise any assets and agree creditors’ claims. The company no longer trades after liquidation and all employees will be made redundant. This is called a Creditors Voluntary Liquidation (“CVL”).

The Compulsory Liquidation process

The second way to wind up a company is to use the Court route called compulsory winding up. This involves the Court hearing a petition to wind up the company and then issuing an order accordingly. The request for compulsory winding up can be made by any creditor owed over £750 or even a director. Once a company is in compulsory liquidation the initial liquidator will always be the Official Receiver local to the company. When in liquidation the company cannot trade and all the staff will be dismissed.

Compulsory liquidation is a much slower process and can take 2-3 months, rather than just 2 weeks for a CVL.

Two final points to consider

A defunct company with no assets or liabilities can be ‘wound up’ by using from DS01 available from Companies House. This means filling in the form DS01 and sending a £10 fee to Companies House to have the company removed from the register. 

If the company being wound up is solvent and can pay all dents in full;then it is normal to use a Members Voluntary Liquidation as it saves tax.

More questions in this section

We have just worked with Kirks to complete the closure of our company. Everything went smoothly and professionally. I would recommend this firm and the staff who were very very helpful and quickly finalised everything. Thank you Kirks.
Carol Hill

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David Kirk

Licensed Insolvency Practitioner