Liquidation can take two forms, either voluntary or compulsory:

1 – Creditors Voluntary Liquidation (CVL) is a decision made by the directors and shareholders to liquidate the company. A licensed insolvency practitioner is appointed by the directors who then sells the assets of the company and pays the remaining funds to the creditors. This is a very much simplified summary of the process but although this is properly regulated by the court it can be a relatively quick process and can give a very quick relief to the directors from the pressures of a failing company.

Leonard James & Co can advise you on choosing a liquidator who we know will be sympathetic to the issues which the directors face and we work with you to ensure that any personal liabilities are minimised. Many clients find this to be one of our most valuable services.

2 - Compulsory liquidation is a process determined by the court at the behest of a creditor. Compulsory liquidation is most commonly a result of action taken by the government agencies to recover either VAT or PAYE though it can be initiated by anyone who you owe money to. The creditor applies to the court for the company to be would up, and if the court approves this the court will appoint a liquidator.

A court appointed liquidator, which may sometimes be the official receiver, will look very closely at the actions of the officers of the company and in some circumstances, such as in mishandling of PAYE, the directors may become personally liable. Allowing a company to go into compulsory liquidation should be avoided at all costs.