Closing down a business is never an easy or welcome decision, but with the right advice, the process can be far more straightforward and relatively stress-free.
Here, we look at the different processes available for company dissolution and highlight some common complications that may arise.
Whether you are closing your business because you are retiring, facing mounting debts, or looking to move operations elsewhere, there will be an appropriate insolvency or restructuring option. For example, some clients choose to start a business in the UAE, purchase a pre-established company for quicker market entry, or even relocate their business to the USA rather than dissolve entirely. It’s worth remembering that company closure doesn’t always have to leave a permanent stain on your reputation. Liquidation should be the last resort, as it involves selling a company’s assets to settle debts before the company is finally closed.
A common mistake company directors make is going straight to an Insolvency Practitioner without seeking independent commercial advice. An Insolvency Practitioner, appointed by the Secretary of State, acts on behalf of creditors and cannot commercially represent you during voluntary liquidation due to conflicts of interest. They are also required to make a report on your conduct before processing the liquidation.
Types of Liquidation
- Voluntary Liquidation (Creditor’s Voluntary Liquidation – CVL): Initiated by the company and managed by a qualified Insolvency Practitioner.
- Compulsory Liquidation: Ordered by the court, conducted by the Official Receiver or an Insolvency Practitioner, and generally more damaging to directors and the company’s reputation.
Completing the process correctly can limit damage, protect your interests, and allow you to move on.
Company Rescue and Liquidations
A business is considered insolvent if:
- It cannot pay its debts (“cash flow insolvent”).
- Its liabilities exceed its assets (“balance sheet insolvent”).
Continuing to trade while insolvent risks personal liability for directors and possible disqualification from holding such roles for up to 15 years.
Rescue and Recovery Options
Not every struggling business is destined for liquidation. With specialist advice, a company may be able to restructure, enter informal creditor agreements, or convert into a different entity, such as a non-profit organisation, if that better suits its future goals.
Formal Closure Routes
- Compulsory Liquidation – Used when a company is unable to pay debts, has minimal assets, or is no longer viable.
- Creditors’ Voluntary Liquidation (CVL) – Allows closure in a controlled way, avoiding the risk of compulsory liquidation. Costs typically range from £3,500–£5,000 plus VAT and disbursements.
- Company Voluntary Arrangement (CVA) – An alternative that lets a viable company continue trading while paying back creditors over time, with protection from legal action.
- Members’ Voluntary Liquidation (MVL) – For solvent companies where all creditors are paid in full, offering tax-efficient capital extraction for shareholders.
Choosing the right closure method is critical for protecting your business, assets, and reputation. Working with an experienced company dissolution specialist ensures compliance, minimises risk, and supports you through each stage of the process.