The quick answer
A liquidator takes control of a company when it can no longer pay its debts in full. The liquidator will close premises, help staff make redundancy claims and sell or collect in the assets. They will then agree creditors claims including banks, suppliers and HM Revenue and Customs. This is so a dividend can be paid to them if there are sufficient funds to do so.
The directors give up control of the company to the liquidator on the day of liquidation.
In more detail
THEIR OFFICIAL ROLE
A liquidator is a Licensed Insolvency Practitioner acting as an Officer of the Court. They have the power to get in and realise assets, dismiss staff and deal with the creditors. They will also close down any offices or business premises.
The overall objective of a liquidator is to make sure all business assets are sold at a fair value and that the creditors are all treated in accordance with their legal rights. Some creditors have different rights to others. As an example, employee’s claims can be preferential – so paid first before other creditors up to a maximum of £800 each, with the balance ranking with other creditors. Another example is a bank may have a first claim if they have a debenture.
A liquidator will report to creditors before they are appointed setting out a financial snapshot of the company and will also send creditors annual reports explaining the progress of the liquidation. These reports must summarise the assets collected and any expenses incurred.
Do You Need A Liquidator?
Any business which is looking to enter into a liquidation will need a Licensed Insolvency Practitioner like us to act as the liquidator. Company directors are not able to liquidate the company themselves. Aside from this, it is also beneficial to have a qualified professional with relevant experience on hand to guide you through what can often be a very complicated and emotional process.
How Much Does It Cost To Get A Liquidator?
The costs of appointing a liquidator depend on the complexity of the business’ situation and the value and number of the assets and liabilities. If a company offers to liquidate your company for a cost which seems too good to be true, the chances are it will be. The liquidator will have their own official costs in relation to the process and these must be covered as a minimum.