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How to Wind Up a Company

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. The liquidator is the Official Receiver.

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 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 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.

“There are two main ways to wind up a company. Either through a Licensed Insolvency Practitioner acting as liquidator or with a Compulsory Winding Up via a Court.”

Two other quick points to mention – a defunct company with no assets or liabilities can be ‘wound up’ by using section 652 of the Companies Act. This means filling in a form and sending a £10 fee to Companies House to have the company removed from the register.

If the company being wound up is solvent, then it is normal to use a Members Voluntary Liquidation.

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