Company liquidation – do’s and don’ts for directors - 13th July 2017


We don’t just handle tax returns here at SW&A. Our team can offer straightforward and jargon-free advice if you are setting up a business or wish to put a company into liquidation.

There are certain rules and regulations surrounding this course of action, many of which focus on your actions as a director. Here’s a summary of a director’s responsibilities.

  • Cease trading as soon as you know your company is insolvent. No new borrowing should be taken on by the company once insolvency is apparent. Should you carry on trading knowing that your company cannot pay its debts, you and other directors will face investigation by the Insolvency Service. This can result in disqualification from company directorship for up to 15 years and financial penalties.
  • Call a meeting of shareholders, during which 75 per cent (by value) need to agree to a ‘winding up resolution’ which effectively leads to the closure of the company. It is at this stage that you appoint a liquidator. Within two weeks of passing the resolution, a meeting of creditors will be called, during which directors must answer questions relating to the situation. A Statement of Affairs will be presented at this meeting, describing the financial position.
  • Hand over business paperwork and assets to the liquidator. This could help the liquidator establish the company’s financial standing, who is responsible for various functions within the company, and how and why the point of insolvency has been reached. HMRC will also require accurate and reliable information.

The liquidator may request an interview with you and other directors and you must answer the questions fully wherever possible. Not only will this help to mitigate your risk of further action by the Insolvency Service, but it will also speed up the liquidation process.

The implications of company liquidation can be serious for directors. Stopping trading as soon as you fear insolvency will help to minimise your personal liability and offer the best chance to improve creditor dividends.

For more detailed information about company liquidation, call SW&A on 01905 622202.


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