MVL GUIDE: Members can choose to liquidate their own company.
But, the business must be able to pay its debts ‘trading solvently’ and one of these reasons must apply:
- You want to retire from the business.
- You decide not to run the business any longer.
- You plan to step down from a family business and nobody else will take over and run it.
Company shareholders must pass a resolution before they apply for members’ voluntary liquidation. That means you must:
- Make a ‘Declaration of solvency’ for those trading as English or Welsh companies.
- Ask the Accountant in Bankruptcy for form 4.25 (Scot) for those trading as Scottish companies.
Note: The current company assets and its liabilities will need reviewing before you make the declaration.
Making a Declaration of Solvency
A declaration of solvency is a statement written by the directors. They declare that they have assessed the company and it can pay all its debts.
This must apply even with any interest added at the official rate. A declaration of solvency should include:
- The registered name and address of the trading company.
- The full names and addresses of the company directors.
- The time it will take the company to pay off all its debts. This must be within 12 months from the date you liquidate your company.
- A statement of the company assets and its liabilities.
After Signing the Declaration or Form
Members who want to wind up a company voluntarily still have a few more steps to complete. After signing the declaration or the form you should then:
- Sign the declaration or form 4.25 (Scot). The majority of the directors must sign it in front of a solicitor or a ‘notary public’.
- Call for a general meeting with the company shareholders. It must take place no more than 5 weeks later and they must pass a resolution for voluntary winding up.
- You should appoint an authorised insolvency practitioner at the meeting. They act as a liquidator who will then take charge of winding up the organisation.
- Advertise the company resolution in The Gazette Official Public Record within 14 days.
- Send the signed declaration to Companies House or form 4.25 (Scot) to the Accountant in Bankruptcy (for Scottish companies). This must occur within 15 days of passing the resolution.
Cardiff CF14 3UZ
Note: The appointment of a liquidator means they take control of the company from then on. That also means the directors’ responsibilities change at the same time.
ALSO IN THIS SECTION
Liquidate a Company: The key aspects to consider when liquidating your limited company.
Compulsory Liquidation: How company directors can apply to the court for a winding up order.
Creditors’ Voluntary Liquidation: CVL involves creditors because the company cannot pay its debts.
What Does a Liquidator Do? A liquidator is the official receiver who conducts the liquidation process.
What happens to Directors? How liquidation affects the directors if a liquidator gets appointed.