Liquidating a Company in Scotland

Liquidating a company in Scotland comes with a few distinct differences to the process south of the border.

If you’re a company director considering liquidation for either your insolvent or solvent limited company, read for our complete guide.

Liquidating a Scottish Company That’s Insolvent

For directors facing liquidation, there are two options for your insolvent company.

Voluntary Liquidation (also known as Creditor’s Voluntary Liquidation (CVL)) is when you opt to instruct an insolvency practitioner yourself rather than waiting for the court to force you into a compulsory procedure. It allows for more directorial control than a compulsory winding up.

Compulsory Liquidation – Creditor pressure, often from HMRC, results in a Winding up Order, which is a High Court ruling which forces your company to close immediately. In this situation, you will not have any say over whether insolvency practitioners are appointed, nor the timing.

What’s the Process of Liquidating a Company?

1. If voluntary liquidation is chosen, the directors will meet to vote upon the resolution to wind up the company. 75% of shareholders must agree.
2. A liquidator (insolvency practitioner) is appointed, and directors’ powers cease.
3. Creditors are informed of the situation and an advertisement is placed in the Edinburgh Gazette, the official journal of public record.
4. A liquidator will prepare a Statement of Affairs document, with the help of directors, outlining the financial situation.
5. Liquidator sells any company assets to repay creditors in order of preference
6. The liquidator will conduct a directorial investigation as part of their legal mandate to check of potential misfeasance, such as wrongful trading
7. At the end of this process, the company is struck off the register at Companies House and ceases to exist

Liquidating a Solvent Scottish Company

Where a solvent company has assets, a process known as Members’ Voluntary Liquidation is the correct way to close it down.

Directors may be approaching retirement or simply starting new ventures and wish to close their company down, sell the assets, and distribute the proceeds amongst shareholders.

Process

• Directors sign a Declaration of Solvency
• Insolvency Practitioner is appointed
• 75% of Shareholders must vote upon the Resolution to Wind up
• MVL is advertised in the Gazette
• Assets are independently valued and sold
• Proceeds distributed to shareholders
• Company is struck off the Register via Companies House

Court Liquidation

What is termed compulsory liquidation in England and Wales is known as Court Liquidation in Scotland.

This is where a creditor, tired of not being paid, petitions a judge to rule upon a company’s non-payment. Where the judge finds against the debtor company, he/she rules a Winding up Order which puts the company into immediate liquidation.

In Scotland, Winding up Petition cases are heard at local sheriff courts unless the case has particular importance, in which case it is dealt with by the Scottish Court of Session.

Process

After the Winding up Order is granted, the Court will immediately appoint an insolvency practitioner as interim liquidator.

• Directors powers cease
• The liquidator will prepare a Statement of Affairs
• The liquidator will arrange an independent valuation of corporate assets, then sell them and distribute proceeds to creditors in order of priority
• The company will be removed from the Registrar of Companies for Scotland

Putting a Business into Liquidation in Scotland

If you’re a director concerned about what will happen if you decide to liquidate your company, here is the way it works

1. Make contact with a licensed insolvency practitioner. NB: you cannot liquidate a company yourself; the law requires working with a regulated professional such as ourselves.
2. If liquidation is decided upon as the appropriate process, the Insolvency Practitioner will take over all dealings with creditors after being officially appointed
3. As directors, your duties will come to an end, employees will be made redundant, premised will close, and the business will cease trading
4. The liquidator will sell assets and repay creditors in order of preference
5. Bank accounts will be closed, and the company will be struck off the register meaning it no longer exists
6. Directors are free to seek additional employment or start another limited company, assuming statutory regulations are followed around Phoenixing

Edinburgh Gazette Insolvency Notices

To see all insolvency notices for Scotland, you can see the digital version of the Edinburgh Gazette, the Official Journal of Public Record, here.

Any insolvency within Scotland must be advertised here.