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Why Should I Liquidate An Insolvent Company?

Last updated: May 12, 2021

The quick answer

The main reason to liquidate an insolvent company is to make it ready to close down. The main advantages to doing this are:

  • Creditors should stop chasing you for money.
  • As a director you can go off and do something else.
  • Employees will be able to claim redundancy.
  • There is no longer a need to file VAT and PAYE returns or accounts.
  • It stops the business losing money.

In more detail

Liquidation will mean that a liquidator takes over and deals with you creditors.

Unless you have personally guaranteed a creditor you probably will never have to speak to them again. In addition, your obligations to file accounts and returns at Companies House will come to an end. You also no longer have to fill in tax, employer or VAT returns with HM Revenue and Customs.

If you have employees who are owed money it means the government will step in and pay your staff in particular their redundancy claims, pay in lieu of notice and arrears of pay. These pay outs can be substantial. These payments are made by the Government run Redundancy Payments Service.

If you know you cannot pay back your creditors and that continuing to trade may make  the position worse then you should stop trading and liquidate your company. In these circumstances  you may be personally liable for future debts if you just carry on as the financial position gets worse.

Although liquidation can be a huge relief when it finally happens you will still need to help the liquidator fulfil his or her role, although the time needed to do this does tend to reduce quite quickly.

Contact Us Today

If you would like to know more about liquidating your company and the process involved, contact us today for confidential and impartial advice.


If you need insolvency advice the earlier you talk to someone like us the better as you will have more options. We can help, contact us today.

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Author: David Kirk - ACA FABRP
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Just a quick email to say a heartfelt thank you for your very calm, considered, expert advice regarding my circumstances on Tuesday. Things looked bleak before you explained my options much more clearly, in simple layman’s terms.
Rob Elliott (14th December 2021)



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David Kirk

Licensed Insolvency Practitioner