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Liquidating a company refers to the process of selling off company assets and ending its existence. It can be done on a voluntary basis, or involuntary, such as where creditors are seeking to recover sums owed from an insolvent company and have to resort to court action.

There are three principal categories of liquidation: (1) creditors’ voluntary liquidation; (2) members’ voluntary liquidation; and (3) compulsory liquidation.

Voluntary liquidation

Creditors’ voluntary liquidation

Where a company is or anticipates becoming insolvent, it may propose to its creditors that the company be liquidated in order to settle debts and liabilities and start afresh.


A voluntary liquidation can only take place with the approval of a company’s shareholders. In order to authorise liquidation, or winding up, of a company, shareholders holding an equivalent of 75% of the share value in the company must approve. Notice of the resolution must be published in the London Gazette within 14 days, and within 15 days the company must issue a copy of the resolution to Companies House. Upon approval, an Insolvency Practitioner will be appointed to oversee the liquidation process.

Within 14 days of the meeting of shareholders, the creditors must convene to consider the company’s liquidation and debt settlement proposal. This meeting will be chaired by the Insolvency Practitioner, and the creditors will vote to appoint a liquidator, which is usually the Insolvency Practitioner. If the creditors vote for a different liquidator, then the creditors’ choice prevails.

Upon appointment of the liquidator, the company’s directors will cease to have control over the company and may be subject to investigation and sanction by the liquidator for any proven misconduct in handling the company’s affairs. Sanctions can include a ban of up to five years from running a company under the same name.

Powers of the liquidator

The liquidator has extensive powers in handling company affairs, including setting aside transactions prior to entry into liquidation that have a detrimental effect on returns for creditors. The liquidator may also enter into contracts necessary to maximise return or raise legal actions against third parties on behalf of the company.

The liquidator will hear evidence of claims submitted by creditors and make a determination as to how distribution should be made. If a creditor wishes to contest a decision of the liquidator, they must do so within 21 days of the relevant decision.

Members’ voluntary liquidation

A members’ voluntary liquidation differs from a creditors’ voluntary liquidation in that it is not usually made in anticipation of or during insolvency. Rather the directors of a company may wish to dissolve the company for the purpose of retirement or to move on to a new company.

Members’ voluntary liquidation can only be sought if the company is in good financial health and can pay off its debts and liabilities.


A members’ voluntary liquidation will commence with a Declaration of Solvency from the company directors, upon review of the company’s assets and liabilities. This must be made within 12 months of the prospective liquidation. As with creditors’ voluntary liquidation, dissolution and sale of the company’s assets can only occur with approval by 75% of the value represented in the shareholder body. The shareholders meeting must convene no more than five weeks after the Declaration has been made, and, upon shareholder approval, a liquidator will be appointed to oversee the process.

In order to be procedurally valid, the shareholder resolution must be published in the Gazette within 14 days of its passing. As with creditors’ voluntary liquidation, a copy of the resolution must also be lodged with Companies House within 15 days.

After completion of the liquidation process, within three months the company will be struck off from the register at Companies House.

Surplus funds and assets

If the sale of the company assets leaves a return after settlement of debts and liabilities, this will be vested in the company’s shareholders. It is important to note that sums in the company account remaining after dissolution of the company will be vested in the Crown, and the company will have to be reinstated in order to have the sums recovered.

Involuntary liquidation

Compulsory liquidation

By contrast with creditors’ or members’ liquidation, a company can be compulsorily liquidated upon court order. A shareholder resolution is not required in every case for a court to grant such an order. This procedure can also be resorted to if there is disagreement between the directors and one wishes to have the company brought to an end.


A compulsory liquidation occurs where creditors, directors, shareholder, or a liquidator apply to court to have the company liquidated. A court will grant compulsory liquidation upon application by a creditor if it is apparent that creditors are unlikely to be paid and it would be just and equitable for all interested parties to have the company liquidated.

If granted, the court will appoint an Official Receiver to value and manage company assets, and the company’s directors will surrender control. 

Sanction of directors

Where a compulsory liquidation occurs, the Official Receiver will report to the Secretary of State regarding the conduct of the directors leading to the liquidation.

If a court makes a finding of wrongful trading by a director, it may order that director to make payments to the company.

Contact our Liquidation Solicitors Mayfair and throughout London

Bringing a company to an end requires meticulous attention to what debts and liabilities owed and to which interested parties might object to the company being struck off.

The Liquidation Solicitors at Lewis Nedas have assisted a wide range of clients with their financial affairs during difficult times, including directors in insolvency and stakeholders such as banks, sponsors and landlords. We have provided expert advice on salvaging company prospects, including reorganising and restructuring of debts.

For further information or to speak to our expert Liquidation Lawyers please contact us on 020 3811 6792 or complete our online enquiry form.

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