The UK business environment is often challenging for companies, especially if they are struggling to cope with financial pressure. The cost of running a business can add up over time and this may result in serious financial distress that ultimately leads to company liquidation uk. While large corporate insolvencies tend to grab the headlines, the fact is that the majority of insolvencies are small companies.

Directors must recognise the signs of insolvency and seek professional guidance when the situation arises. This can help prevent the need to put the business into compulsory liquidation.

Navigating Company Liquidation in the UK: Important Steps and Regulations

There are two types of liquidation – members’ voluntary liquidation (MVL) and creditors’ voluntary liquidation (CVL). An MVL occurs when a solvent company chooses to wind up its affairs voluntarily by passing a resolution to do so at a meeting. This is typically done because the directors feel that it is no longer viable to trade and want to access the profits tied up in the company.

A CVL is a more formal process and is initiated by the court on the basis of a petition from one or more creditors. The court will appoint an Official Receiver who will take control of the company. During the liquidation process, the assets of the company will be sold and the proceeds distributed to the creditors. Creditors who have security over the company’s assets are entitled to priority and will be paid before other creditors receive anything.