The UK's Companies Act 2006 addresses appropriate liquidation funding and fit and proper conduct by directors when winding up a business.
Under the Insolvency Act of 1986, anyone undertaking the duties of liquidator, administrative receiver, administrator or supervisor of a corporate voluntary arrangement must be a qualified insolvency practitioner .
Types of dissolution
Voluntary liquidation involves dissolving all of a company's assets, paying off employees in accordance with redundancy law and closing the business down. It is usually only considered when all other options have failed (e.g. when no one is interested in buying the business or taking over its management).
A company can be wound up by compulsory liquidation under a court order. If there are sufficient assets, the official receiver will call a first meeting of the creditors to appoint an insolvency practitioner as liquidator. You can apply for the court order yourself but usually it will be made by a creditor owed more than £750.
In a compulsory liquidation the official receiver is appointed to wind up the business.
When filing for bankruptcy is the only option left for a business owner, it pays to cut losses, initiate proceedings sooner rather than later, and move on to a new business project.
Guidance on the liquidation and insolvency procedures can be found at:
Differing liquidation procedures apply when winding up Limited Liability Partnerships (LLPs):
Liquidations result in companies being automatically dissolved, normally after three months.
Businesses that do not have the assets to justify formal liquidation and have ceased trading may apply to be removed from the company register. The registrar may also remove the name of a business from the company register if there is reason to believe it is no longer trading.
If your company or organisation ceases trading or business activity, closes down or is forced to close down, you may still have to file Company Tax Returns and pay Corporation Tax during the closing process. The Business Link website provides full guidance.
Business Link's "alternatives to bankruptcy" interactive tool is available for online assessments. It also provides help and advice with debt problems leading to winding-up.
Frequently asked questions (FAQs) can be consulted on the Companies House and Insolvency Service websites.