For many company directors, the idea of liquidation can feel like entering unfamiliar territory. Whether you’re closing down a solvent business or facing financial difficulties, understanding the process is key to making the right decisions. To make things clearer, we’ve put together this guide: the top 10 UK company liquidation FAQs that directors are asking in 2025.
1. What does liquidation actually mean?
Liquidation is the formal process of closing a company and bringing its affairs to an end. This typically involves selling off assets, paying creditors (where possible), and formally dissolving the business from Companies House. There are different types of liquidation depending on your company’s financial situation—either voluntary or compulsory.
2. What’s the difference between solvent and insolvent liquidation?
If your company can pay its debts and has money left over after winding down, it’s considered solvent. In this case, you’d likely go for a Members’ Voluntary Liquidation (MVL). If the company can’t pay what it owes, it’s insolvent and would go through a Creditors’ Voluntary Liquidation (CVL) or face Compulsory Liquidation.
3. Do I need an Insolvency Practitioner to liquidate my company?
Yes. For both MVLs and CVLs, a licensed Insolvency Practitioner (IP) must be appointed to oversee the process. They ensure the company’s affairs are wound up properly and legally, while also protecting the interests of creditors and stakeholders. You cannot carry out a formal liquidation without one.
4. How long does it take to liquidate a company?
The timeline can vary depending on the complexity of the company’s structure and the type of liquidation. A straightforward MVL may take around 3–6 months, while a CVL could take longer—up to a year or more—especially if investigations into company conduct are needed or assets take time to realise.
5. Will liquidation affect my personal finances or credit rating?
Generally, company debts stay with the business unless you’ve given personal guarantees to lenders. In most cases, your personal credit rating won’t be affected by a company liquidation. However, your conduct as a director during the lead-up to insolvency could be investigated, especially if wrongful trading is suspected.
6. Can I start a new company after liquidating the old one?
Yes, but there are rules. While directors of a liquidated company are not automatically disqualified, there are restrictions—especially around “phoenixing” (starting a new company with the same or similar name). This is governed by Section 216 of the Insolvency Act 1986 and must be handled carefully to avoid penalties.
7. What happens to employees during liquidation?
Employees are made redundant when the company enters liquidation. However, they may be entitled to claim for unpaid wages, holiday pay, notice pay, and redundancy from the Redundancy Payments Service (RPS). The Insolvency Practitioner will handle communications with staff and provide the necessary information.
8. Do I have to inform HMRC and Companies House?
Yes, but your Insolvency Practitioner will usually handle all official notifications. This includes informing HMRC, Companies House, and other stakeholders. They’ll also deal with outstanding tax matters such as VAT returns or PAYE settlements as part of the winding-up process.
9. Is liquidation expensive?
There are costs involved, which vary depending on the complexity of the company and whether it’s solvent or insolvent. For solvent liquidations (MVLs), fees may be lower—especially if assets are straightforward. In a CVL, fees are usually taken from the company’s assets. Cost-effective solutions do exist, and some providers offer fixed-fee structures to help directors manage costs.
10. Where can I get trusted, no-nonsense advice on liquidation?
That brings us to perhaps the most important point. If you’re unsure whether liquidation is the right route or you simply need help understanding your responsibilities, it’s essential to speak to a licensed Insolvency Practitioner—not a broker or sales rep.
Final Thoughts
Liquidating a company is a big step, and it’s completely natural to have questions. Whether your business is facing financial pressure or you’re simply wrapping things up on good terms, being informed is your best asset.
If these UK company liquidation FAQs have raised further questions, or if you’re considering taking action in 2025, it pays to speak with an expert.
At Simple Liquidation, we specialise in helping directors through the liquidation process with clear advice, fixed-fee options, and a team of licensed professionals with over 30 years’ experience. We’re not intermediaries or call centres—we’re insolvency practitioners you can talk to directly.
For honest, straightforward advice—get in touch with Simple Liquidation today.
