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What is Liquidation of a Company?

A liquidation of a company uk is the official end of a limited company’s trading life. The process is governed by the law and should be undertaken by a licensed insolvency practitioner.

Invoking a creditors’ voluntary liquidation (CVL) or a members’ voluntary liquidation (MVL) is the first step in closing down a business. This process is usually only used when it is clear that a turnaround or restructuring isn’t possible.

Once the liquidation of a company has been completed, it is struck off from the Companies House register and ceases to exist. The assets are then sold off and profits distributed amongst creditors. There is a legal sequence that insolvency practitioners must follow when distributing funds – with secured creditors receiving their share first, followed by unsecured creditors and shareholders.

Insights into Liquidation of a Company in the UK: Legal Procedures and Requirements

Directors and shareholders are prohibited from setting up a new company that trades in the same sector for 12 months following the liquidation of the old one. This is to prevent what’s known as ‘phoenixing’ – the practice of running a new company under a similar name to avoid debts and liabilities.

Liquidation of a company can be expensive, especially for directors who must pay the insolvency practitioner’s fees. This is typically covered by selling off company assets, but if there aren’t enough available, directors may be liable to cover these costs personally. It can also lead to wrongful trading action being brought against you, which is why it’s important to get expert advice at the very beginning of the procedure.