Voluntary liquidation vs compulsory liquidation

If you are one of the thousands of UK businesses issued with a winding up petition, it may well be that you are unable to see how your business can survive, and are perhaps considering letting your company be wound up.  Or you may have received a winding-up petition and you want to know your options? Allowing your company to be wound up without first seeking advice on your options is likely to prove very costly at some point.  We discuss voluntary liquidation vs compulsory liquidation below, to help you consider and plan your next steps.


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Voluntary Liquidation Vs Compulsory Liquidation (court process)

The first and main benefit of voluntary liquidation is that it gives you time to talk with your insolvency practice of choice. You can take advice and firm up answers to some of the issues that may be on your mind.  We’ve listed below a few of the most common concerns or problems that directors face at this time, which are often much better dealt with in a well organised voluntary liquidation:

  • Personal Guarantees: when the company goes into liquidation, any personal guarantees you have given will ‘crystallise’ or become payable; ideally you need a preemptive plan in place to deal with this.
  • Director’s redundancy claims: if you have been on the company’s payroll, you may be entitled to make a claim for directors’ redundancy.  This could be crucial income at a time that you most need it.
  • Director’s loan accounts: the liquidator will look to recover any funds owing from an overdrawn director’s loan account.
  • Director’s conduct advice: the liquidators’ investigation into your conduct as company director is a mandatory aspect of liquidation.
  • Redundancy process or transfer of existing staff to a new business.
  • Sale of assets
  • Transfer of leases

As voluntary liquidation is a paid service that we provide, you won’t be too surprised when we say it is normally a better option!  However, in terms of making you better prepared and able to cope with what liquidation will throw at you, voluntary liquidation is a much more controlled solution.

It also gives you chance to find out any other information or options that you might not be aware of.  This means that you can plan for what liquidation will entail, rather than having the choices of the Official Receiver forced upon you.rightsteps

Next Steps

When a company is wound up by HMRC or anyone else, once the Official Receiver is officially appointed, the liquidation process begins.  However, even if a petition has been issued, you can still apply for voluntary liquidation at any time prior to the court hearing date.

If you are worried about the costs of voluntary liquidation, try our liquidation fee calculator to get a quote for what voluntary liquidation might cost you.

Alternatively, if you would like to talk this through with one of our business rescue experts, use our booking system to arrange a meeting or contact one of our business rescue experts directly.