{"id":1469,"date":"2022-01-10T03:29:22","date_gmt":"2022-01-10T03:29:22","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=1469"},"modified":"2025-05-08T05:24:49","modified_gmt":"2025-05-08T04:24:49","slug":"winding-up","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/winding-up\/","title":{"rendered":"How Do I Wind Up a Company in England and Wales?"},"content":{"rendered":"\n<p><span style=\"font-weight: 400\">Perhaps you own a company, are looking to retire, and have decided against a sale or transfer of the business. Alternatively, maybe you have given a loan to a company, and you wonder what your last-resort options are to recover your debt. Winding up refers to the process of <\/span><span style=\"font-weight: 400\">removing<\/span><span style=\"font-weight: 400\"> a company from the <\/span><a href=\"https:\/\/www.gov.uk\/government\/organisations\/companies-house\"><span style=\"font-weight: 400\">Companies House registry<\/span><\/a><span style=\"font-weight: 400\">. You might think of it as \u2018unincorporating\u2019<\/span><span style=\"font-weight: 400\"> or closing <\/span><span style=\"font-weight: 400\">the company, so that its creditors receive their money, with any remaining funds distributed to its shareholders. This article will explain the three principal ways to wind up a company in England and Wales: members\u2019 voluntary liquidation, creditors&#8217; voluntary liquidation or compulsory liquidation.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Overview<\/span><span style=\"font-weight: 400\">&nbsp;<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">We can divide the different types of liquidation processes into:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">those for solvent companies; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">those for insolvent companies.\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400\">In most cases, solvent companies that want to wind themselves up will do so through a \u2018members\u2019 voluntary liquidation\u2019, where the shareholders pass a special resolution initiating the process.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">If a company cannot meet its financial obligations, it is \u2018insolvent\u2019. Depending on the circumstances, the company\u2019s shareholders may decide to instigate a liquidation on behalf of the creditors. This is called a creditors\u2019 voluntary liquidation.&nbsp;<\/span><span style=\"font-weight: 400\">Insolvent companies may also face \u2018compulsory liquidations\u2019, where a company\u2019s creditors will petition the court to order the company to begin winding up.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">In all cases, the relevant party will appoint a \u2018liquidator\u2019. The liquidator is a professional insolvency practitioner who manages the process and protects the rights of the shareholders and creditors according to insolvency law.&nbsp;<\/span><\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Members\u2019 Voluntary Liquidation for Solvent Companies<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">A <\/span><span style=\"font-weight: 400\">members\u2019 voluntary liquidation (<strong>MVL<\/strong>)<\/span><span style=\"font-weight: 400\"> is an option for solvent companies. Below, we explain the process for an MVL and all relevant actors in the process.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Declaration of Solvency&nbsp;<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">Directors of a solvent company wishing to bring its business to an end must first declare that it can meet all its obligations in the next 12 months from the start of the process. In other words, they must be certain that all the company\u2019s creditors will receive their money in full. <\/span><span style=\"font-weight: 400\">They must accompany this declaration with a \u2018statement of affairs\u2019 that lists the company\u2019s assets and liabilities.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Passing a Special Resolution<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">The company\u2019s shareholders must pass a special resolution ordering an MVL. This requires at least 75% of the shareholders\u2019 votes.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">Your company can do this by:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">a show of hands at a general meeting;\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">a poll at a general meeting; or<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">written resolution.\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">You will also file this resolution with Companies House using <\/span><a href=\"https:\/\/www.gov.uk\/government\/publications\/give-notice-of-statutory-declaration-of-solvency-liq01\"><span style=\"font-weight: 400\">Form LIQ01<\/span><\/a><span style=\"font-weight: 400\"> within 15 days of passing the resolution.&nbsp;<\/span><\/p>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Appointing the Liquidator&nbsp;<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">You will need to appoint an authorised insolvency practitioner at the special resolution meeting. This person will be the liquidator and will manage the process.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"box box--icon box--star\">\n<p><span style=\"font-weight: 400\">You can <\/span><a href=\"https:\/\/www.gov.uk\/find-an-insolvency-practitioner\"><span style=\"font-weight: 400\">find an insolvency practitioner online<\/span><\/a><span style=\"font-weight: 400\">.&nbsp;<\/span><\/p>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Notifying Certain Creditors<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">If your company has any floating charges over its assets, you will need to notify these creditors in writing of the resolution.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Advertising the Liquidation in the Gazette&nbsp;<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">Within 14 days, you will need to advertise that the company is initiating an MVL in <\/span><a href=\"https:\/\/www.thegazette.co.uk\/companies\"><span style=\"font-weight: 400\">The Gazette<\/span><\/a><span style=\"font-weight: 400\">. Your liquidator will also need to publish a notice of their appointment in the Gazette.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Selling off the Assets&nbsp;<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">The liquidator will use your company\u2019s assets to repay your creditors according to the \u2018order of priority\u2019. This order of priority is set out under the law.\u00a0<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">The general rule is that your creditors will receive the proceeds from the sale of your company\u2019s assets until they receive their money in full. At this point, the liquidator will distribute the remaining money to the shareholders, according to the rights attached to the shares.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Final Steps&nbsp;<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">In most cases, the dissolution of your company will occur within three months from when the liquidator delivers their Final Report to the Registrar of Companies. 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This is a creditors\u2019 voluntary liquidation (<strong>CVL<\/strong>). Below, we explain the process for a CVL and all relevant actors in the process.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Passing a Special Resolution<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">Like in an MVL, the company\u2019s shareholders must initiate a CVL through a special resolution. This requires 75% or more of the shareholders\u2019 votes.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"box box--warning box--icon\">\n<p><span style=\"font-weight: 400\">Typically, the directors will recommend this to the shareholders once it has become apparent that the company cannot meet its obligations and there are no opportunities to rescue the company.&nbsp;<\/span><\/p>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Appointing a Liquidator<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">Shareholders must nominate a liquidator at the meeting, at which point the process will have commenced. The creditors will then have the right to appoint a different liquidator. The directors will need to notify the creditors seeking their consent of the liquidators\u2019 appointment. Like in an MVL, the directors must prepare a statement of affairs outlining the company\u2019s assets and liabilities.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">Typically, if less than 10% of the \u2018creditors in value\u2019 disagree, the law will imply that all creditors agree. Creditors in value are measured by the amount owed by the company to each creditor.<\/span><\/p>\n\n\n\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">In some cases, the creditors can require a physical meeting throughout this process.<\/span><\/p>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">The Liquidation Process<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">A \u2018proof of debt\u2019 is evidence of a debt obligation (such as a loan, bond, or trade credit) between a creditor and the company. Each creditor must submit <\/span>proof of debt to the liquidator. The liquidator will then decide to approve it in whole, in part, or reject it. This will inform the liquidator of where to distribute the <span style=\"font-weight: 400\">proceeds. Creditors with security over the company&#8217;s assets are entitled to the proceeds of the asset&#8217;s sale.\u00a0The liquidator will sell the company\u2019s assets and distribute the proceeds to the creditors according to the order of priority.\u00a0<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">The liquidator will pay any creditors without security on a &#8216;pari passu&#8217; basis. This means that each will be entitled to a share of any remaining assets after the secured creditors are paid. The amount distributed to each creditor will be in proportion to the debts the company owes.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">As an example, consider that BadCo owes:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">\u00a310,000 to Creditor A;<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">\u00a390,000 to Creditor B; and<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">\u00a3500,000 to Creditor C.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">Creditor C has security over some of BadCo\u2019s assets and receives their money back in full. After this, there are \u00a390,000 worth of assets remaining. However, BadCo has \u00a3100,000 worth of liabilities. In other words, it can only pay back 90% of the debt.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">This means that Creditor A and Creditor B will recover 90% of their debt, or:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">\u00a39,000 to Creditor A; and&nbsp;<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">\u00a381,000 to Creditor B.&nbsp;<\/span><\/li>\n<\/ul>\n<\/div>\n\n\n\n<p><span style=\"font-weight: 400\">Where a company is insolvent, by definition, it does not have enough money to pay back all its creditors. This means that the shareholders will receive nothing during the process, as all money must go towards paying creditors.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Impact on Directors&nbsp;<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">The directors&#8217; powers automatically end when the CVL passes via a special resolution. However, the creditors can permit the directors to continue exercising certain powers at the creditors\u2019 discretion.<\/span><\/p>\n\n\n\n<div class=\"box box--warning box--icon\">\n<p><span style=\"font-weight: 400\">As part of the process, the liquidator will send a report to the Secretary of State on the directors\u2019 conduct related to the company\u2019s insolvency. If the directors were found to have breached their duties, they may be disqualified from being directors in the future and face civil and criminal liabilities.&nbsp;<\/span><\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Compulsory Liquidation&nbsp;<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">If your company is insolvent, in some circumstances, your creditors may bring a petition to court to wind up your company, or a director can also ask a court to order the company to be wound up in certain circumstances. This is a compulsory liquidation. Below, we explain the process for a compulsory liquidation commenced by creditors and all relevant actors in the process.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Petitioning the Court&nbsp;<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">In broad terms, the main distinction between a CVL and a compulsory winding-up is the court\u2019s involvement from the outset. If a creditor has reason to think the company will not repay their debts or cooperate, it can present a \u2018winding-up petition\u2019 to a court.\u00a0<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">If the court grants a hearing, the company will have the chance to oppose the petition. The judge will then either:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">grant the petition and issue a winding-up order;\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">\u2018adjourn the petition\u2019, which is where the court will defer a judgment if it has reason to think the company may be able to repay its debts; or\u00a0<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">dismiss the petition outright.\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">The Liquidator&nbsp;<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">If the court grants the petition, it will appoint an Official Receiver (<strong>OR<\/strong>), an officer of the court that manages the winding-up process. The creditors can then organise and replace the OR with a liquidator of their choice.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span style=\"font-weight: 400\">The Process<\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400\">When a company is subject to compulsory liquidation, an automatic statutory moratorium takes effect once the winding-up order is made. This means creditors cannot take legal action to recover debts without court permission. This temporary freeze allows for an orderly liquidation process, ensuring fair treatment of all creditors.<\/span><\/p>\n\n\n\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">If you are a creditor to the company, you will have to advocate your position within the compulsory liquidation process.&nbsp;<\/span><span style=\"font-weight: 400\">You are entitled to receive updates on the progress of the process from the liquidator. You can also form a \u2018liquidation committee\u2019 to help the liquidator.&nbsp;<\/span><\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Directors&#8217; Responsibilities Before Liquidation<\/h2>\n\n\n\n<p>Before liquidation, directors must act in creditors\u2019 best interests if the company is insolvent. Continuing to trade while knowing the company cannot meet its obligations could lead to a breach of directors&#8217; duties and wrongful trading allegations, resulting in personal liability or disqualification.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Alternatives to Liquidation<\/h3>\n\n\n\n<p>Companies struggling financially may have options before liquidation, such as a Company Voluntary Arrangement (CVA) or administration, which can allow restructuring instead of winding up.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Key Takeaways&nbsp;<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">Companies typically wind up because they are insolvent. This will usually happen through a creditors\u2019 voluntary liquidation or compulsory liquidation. However, a company may also simply wish to cease trading and sell all its assets, and the proceeds distributed to the shareholders. You can achieve this through a members\u2019 voluntary liquidation.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">If you need help navigating your company\u2019s financial difficulties, our <a href=\"https:\/\/legalvision.co.uk\/business-lawyers-lp\">experienced commercial lawyers<\/a> can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at <a href=\"tel:+448081968584\" class=\"AVANSERnumber dynamic-number\">0808 196 8584<\/a> or visit our <\/span><a href=\"https:\/\/legalvision.co.uk\/membership\"><span style=\"font-weight: 400\">membership page<\/span><\/a><span style=\"font-weight: 400\">.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Frequently Asked Questions<\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1641785064363\"><strong class=\"schema-faq-question\"><strong>How do I wind up a company?<\/strong><\/strong> <p class=\"schema-faq-answer\">You can wind up a company through members\u2019 voluntary liquidation, creditors\u2019 voluntary liquidation, or through compulsory liquidation.\u00a0<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1641785075855\"><strong class=\"schema-faq-question\"><strong>I am worried my company may not be able to pay all its debts. Should I keep trading?<\/strong><\/strong> <p class=\"schema-faq-answer\">You should seek immediate advice the moment you realise your company may not be able to meet all of its liabilities. Then, an expert can advise you on if you can continue to trade or not.\u00a0<\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"488c9024c8\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/1469\" \/>            <input value=\"https:\/\/legalvision.co.uk\/corporations\/winding-up\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"How Do I Wind Up a Company in England and Wales?\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Perhaps you own a company, are looking to retire, and have decided against a sale or transfer of the business. Alternatively, maybe you have given a loan to a company, and you wonder what your last-resort options are to recover your debt. Winding up refers to the process of removing a company from the Companies<a href=\"https:\/\/legalvision.co.uk\/corporations\/winding-up\/\">Continue reading <span class=\"sr-only\">&#8220;How Do I Wind Up a Company in England and Wales?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13458,"featured_media":616,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"866,2243,2299,1776,2537,1669","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[28],"tags":[20,21,109,122,125,223,302,303,304],"class_list":["post-1469","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporations","tag-small-business","tag-medium-business","tag-members-voluntary-liquidation","tag-liquidation","tag-insolvency","tag-large-business","tag-winding-up","tag-compulsory-liquidation","tag-creditors-voluntary-liquidation"],"acf":[],"yoast_head":"<!-- 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