Liquidate a Company
If you are considering liquidating your company, you probably already know that something has to change. You may be behind with HMRC, struggling to pay suppliers, putting your own money into the business or simply know that the company has reached the end of the road.
At this point, most directors want answers to a handful of practical questions:
- How much will liquidation cost?
- How quickly can I close the company?
- Should I use a CVL or a Director’s Petition?
- What happens to the company’s debts?
- Will I have to pay anything personally?
Those are exactly the questions we think you should be asking.
The starting point is to choose the right way of putting the company into liquidation — and in Scotland there is more than one route.
What is the best way to liquidate a Scottish company?
For directors who have decided that an insolvent company needs to close, the two routes most likely to be relevant are a Creditors’ Voluntary Liquidation or a Director’s Petition.
Creditors’ Voluntary Liquidation
A CVL is normally the most direct route where the shareholders agree that the insolvent company should be wound up.
The directors instruct an insolvency practitioner, the process is prepared in advance and the company enters liquidation voluntarily.
For many straightforward Scottish companies, this is likely to be the quickest and most cost-effective option.
Director’s Petition
A Director’s Petition asks a Scottish court to make a winding-up order against the company.
It normally costs more and takes longer than a straightforward CVL because a court process is involved.
But there are situations where the court route is appropriate — particularly where the ordinary voluntary process cannot readily be used.
Not sure which route you need?
You do not need to decide before speaking to us. We would normally start by looking at:
- Who the directors and shareholders are
- Whether the shareholders agree that the company should close
- What the company owes
- What assets and cash remain
- Whether employees are involved
- Whether HMRC or another creditor is already taking enforcement action
- Whether a winding-up petition has already been presented
From there, it is usually possible to explain quite quickly which route is available, what it is likely to cost and how long it should take.
How much does company liquidation cost?
This is usually one of the first questions directors ask — and it should be.
The cost depends on which liquidation route is used and how complicated the company is.
A straightforward CVL will normally cost less than a Director’s Petition because the petition also involves Scottish court, legal, service and advertising costs.
For CVLs, we want Lennox pricing to be clear from the outset rather than making you go through several conversations before anyone tells you what the process will cost.
Our entry-level CVL fee: £3,500 plus VAT and disbursements (usually between £400 to £650)
If your case requires more work, we will explain why and what the cost will be before you agree to proceed.
How quickly can I liquidate the company?
This is usually one of the first questions directors ask — and it should be.
We can begin reviewing the company and preparing a Scottish CVL as soon as we have the necessary records. How long preparation takes depends on the company’s assets, creditors, employees, records and any urgent court or enforcement action. The company enters voluntary liquidation when shareholders pass the winding-up resolution. Creditors are then given the Scottish statutory decision process for the liquidator: the decision date is at least three business days after notice and no later than 14 days after the resolution. Completing the liquidation can take considerably longer while the liquidator deals with the company’s affairs. We will give you a realistic timetable for both stages.
What if there is no money left?
A company does not need a healthy bank balance to enter liquidation.
Many directors contact us precisely because the company has run out of cash.
Before assuming liquidation cannot be afforded, look at the whole position.
The company may still have value in:
- Money owed by customers
- Vehicles
- Equipment
- Stock
- Tax repayments
- Other company assets
If there genuinely are no available company funds, we can explain what options remain and what contribution may be required to put the company into liquidation properly.
What if most of the debt is owed to HMRC?
That is extremely common.
A company can enter liquidation owing VAT, PAYE, Corporation Tax and other HMRC liabilities.
The important question is whether the company can realistically recover.
If the underlying business is viable, HMRC Time to Pay or restructuring may still deserve consideration.
If the company cannot pay current taxes as well as its old arrears, continuing to build up more HMRC debt may simply make the eventual insolvency worse.
What happens to me as a director?
For many directors, this is the question behind all the other questions.
You may be worried about:
- Having to pay the company debts yourself
- Personal guarantees
- Your Director’s Loan Account
- A Bounce Back Loan
- Your home
- Director disqualification
- Whether you can start another company
Putting a limited company into liquidation does not automatically transfer its debts to you personally.
But there may be individual issues that need to be understood before the liquidation starts.
The earlier we identify them, the less likely you are to discover an unexpected personal problem after the company has already gone into liquidation.
What if something urgent is already happening?
Tell us at the beginning of the conversation.
Particularly if:
- A winding-up petition has been presented
- Sheriff officers are involved
- The company bank account has been arrested
- HMRC has started formal enforcement
- Payroll is due and cannot be met
- A landlord or major supplier is about to take action
The company may still be able to enter voluntary liquidation, but what has already happened can change the options and timing.
If there is a court date or enforcement deadline, lead with that.
What if a creditor is already trying to liquidate the company?
That moves the company into a different position.
A creditor — often HMRC — can ask a Scottish court to make a winding-up order against the company.
If a petition has been presented but the court has not yet made the order, there may still be options.
If the winding-up order has already been made, the company is in compulsory liquidation and the directors no longer control the process.
Start with the question you actually need answered:
How does a CVL work?
See the Scottish process from the directors’ decision through to appointment of the liquidator.
How much will it cost?
Understand CVL fees, outlays and what you should expect a quotation to cover.
How long will it take?
Understand the difference between getting the company into liquidation and completing the liquidation afterwards.
No money left?
Running out of cash does not necessarily prevent the company entering liquidation.
Owe HMRC?
Understand what happens to VAT, PAYE and other HMRC liabilities in liquidation.
CVL or court petition?
Compare the two main routes directors commonly use to liquidate an insolvent Scottish company.
Think the company has reached the end of the road?
You do not need to arrive with a diagnosis or know which insolvency procedure to ask for.
Tell us:
- Roughly what the company owes
- What money and assets remain
- Who the directors and shareholders are
- Whether employees are involved
- What creditor pressure you are facing
We can then explain whether there is anything realistic left to rescue or whether the sensible next step is to put the company into liquidation.
If liquidation is appropriate, we will explain which route, how much it should cost, how quickly it can be done and what it means for you personally before you decide to proceed.