It can be misunderstood that winding up a company and liquidating your company are the same thing – This is not the case, essentially, they are both two different stages in the process of company closure. The process of liquidation focuses on the selling off the company assets to pay creditors, followed by the closure of the company. Whereas winding up is where you end all business affairs and then close the company.
What is Liquidation?
Liquidation essentially means selling the company, so for example, once all long-term relationships have been dealt with, the business assets are liquidated. Due to the specific nature of UK law, only a professional Insolvency Practitioner is qualified to liquidate a company’s assets.
There are two types of liquidation:
Members’ Voluntary Liquidation (MVL): The company is financially solvent. All proceeds will be distributed amongst members.
Creditors’ Voluntary Liquidation (CVL): The company is unable to pay its creditors.
How Much Does It Cost?
Due to liquidations having to be carried out by a licensed insolvency practitioner, it does come with a cost. The exact cost can’t be determined because not all practitioners are the same but usually it is between £2500 and £6500. It is important to remember that ultimately it is down to the quality of the practitioner, so it might seem sensible to go for the cheapest one, but you need to be confident that they are going to manage the situation for you.
How Long Does Liquidation Take?
Liquidation can be done in as little as a month, however, depending on the situation some can take 3 months, 6 months or longer. It is important to remember that in order to get liquidation done you need to get all the paperwork compiled as quickly as you can. Also, cooperating with the practitioner is key for it being a successful process.
What Are the Effects of Putting Your Company into Liquidation?
In most cases, company directors are not affected when their company gets put into liquidation. It is important to remember that it will be public knowledge that you were once a director of a company that is now in liquidation. However, this would only be seen if someone does an in-depth search on you.
Liquidation doesn’t affect your personal credit rating or reputation, and if there are exceptions to this then there are many companies available that advise the appropriate action.