Red letters from suppliers are piling up, HMRC is chasing overdue VAT, and every search result warns about wrongful trading. When a UK company slides into serious distress, directors usually consider three main routes: a Company Voluntary Arrangement (CVA), voluntary strike-off, or liquidation (CVL, MVL or compulsory). Choose carelessly and you could face civil contribution claims, disqualification, or even criminal offences under the Companies Act 2006 or Insolvency Act 1986.

This guide sets out the differences side by side and helps you identify your safest next step.

CVA, Strike-Off and Liquidation in 60 Seconds

When cash is tight, these three routes dominate the conversation. Each carries different levels of control, cost and director scrutiny.

Question to ask	CVA	Strike-Off (DS01)	Liquidation*
Main purpose	Rescue the business by repaying debts over time	Remove a company from the register	Wind up and distribute assets or close an insolvent firm
Solvency status allowed?	Insolvent or likely to become insolvent	Must meet statutory eligibility conditions (not trading in last 3 months, no liquidation threats, no creditor arrangements)	CVL/Compulsory: insolvent • MVL: solvent
Cost (statutory)	No court fee to start	£13 online / £18 paper	Compulsory: £343 court fee + £2,600 deposit
Director keeps control?	Yes, under supervisor oversight	Yes until dissolution	No, liquidator or Official Receiver takes control
Statutory director conduct report required?	No (reporting duty does not apply to approved CVAs)	No	Yes (liquidations require conduct reporting)
Typical speed	Several weeks to approval	Minimum 2 months from Gazette notice	Varies: months to over a year

Liquidation covers Creditors’ Voluntary (CVL), Members’ Voluntary (MVL) and compulsory court liquidation.

Is Your Company Insolvent? (Why This Question Comes First)

Before choosing any route, you must assess solvency.

UK law recognises two main tests:

• Cash-flow insolvency: inability to pay debts as they fall due.
• Balance-sheet insolvency: liabilities exceed assets.

If your company cannot pay its debts, formal insolvency procedures such as a CVA, administration or liquidation may be appropriate. Strike-off is not intended as an alternative to formal insolvency proceedings, and Companies House can suspend dissolution if creditors object.

Warning signs include:

• Overdue VAT or PAYE.
• Statutory demands or winding-up threats.
• CCJs.
• Repeated creditor pressure.
• Directors funding routine expenses personally.

If insolvency is likely, strike-off may trigger objections or restoration applications later.

Director Liability and Legal Risks If You Delay or Choose Wrongly

Delay can expose directors personally.

1) Wrongful Trading (IA 1986 s.214)

If directors continue trading when they knew or ought to have concluded there was no reasonable prospect of avoiding insolvent liquidation, a court may order a personal contribution.

2) Director Disqualification (CDDA 1986)

Directors of insolvent companies are reported to the Insolvency Service. Unfit conduct can lead to disqualification for up to 15 years.

3) Strike-Off Offences (Companies Act 2006)

• s.1004: An application must not be made if the company has traded in the previous 3 months, changed its name, entered insolvency proceedings, or made arrangements with creditors.
• s.1006: It is a criminal offence to fail to send copies of the strike-off application to creditors, employees, members and others within 7 days, particularly if done with intent to conceal.

4) Transactions at Undervalue, Preferences, Misfeasance

Liquidators can challenge:

• Transactions at undervalue (s.238 IA 1986)
• Preferences (s.239 IA 1986)
• Misfeasance (s.212 IA 1986)

These can lead to court-ordered repayments.

Matching Common Scenarios to the Right Procedure

Scenario	Snapshot	Possible Route
A	Dormant, no debts	Strike-Off
B	Insolvent, no assets	CVL or creditor petition
C	Insolvent, assets to realise	CVL
D	Viable business with debt burden	CVA
E	Solvent, directors want orderly exit	MVL

Official guidance does not prescribe a “best” route for each case, but eligibility depends on solvency, creditor position and statutory requirements.

Company Voluntary Arrangement (CVA)

A CVA is a formal insolvency procedure under Part I of the Insolvency Act 1986 allowing a company to repay debts over time.

Who qualifies

A company that is insolvent or likely to become insolvent may propose a CVA. A licensed insolvency practitioner (IP) must act as nominee.

Voting requirements

• 75% or more (by value) of creditors voting must approve.
• If more than 50% (by value) of unconnected creditors vote against, the proposal fails (Insolvency Rules 2016 r.15.34).
• A members’ meeting must also be summoned to consider the proposal.

Once approved, it binds unsecured creditors entitled to vote.

Process overview

1. Directors appoint IP as nominee.
2. Proposal drafted.
3. Nominee reports to court.
4. Meetings of creditors and members held.
5. If approved, nominee becomes supervisor.

Investigation

The statutory duty to file a conduct report does not apply solely because a CVA is approved.

Key risks

• Secured creditors may still enforce security.
• Failure to comply can lead to termination and possible liquidation.

Voluntary Strike-Off (DS01)

Strike-off removes a company from the register.

Eligibility (Companies Act 2006 s.1004)

The company must not have:

• Traded in the last 3 months.
• Changed its name in the last 3 months.
• Entered insolvency proceedings.
• Made arrangements with creditors (e.g., a CVA).

Application process

1. The majority of directors sign DS01.
2. File online (£13) or paper (£18).
3. Send copies to creditors, employees, members within 7 days (s.1006).
4. Gazette notice published.
5. If no objections after at least 2 months, dissolution occurs.

Bona Vacantia

On dissolution, remaining property passes to the Crown.

Restoration

• Administrative restoration generally within 6 years (CA 2006 s.1024).
• Court restoration also typically within 6 years (s.1029).

Restoration reinstates the company as if never dissolved.

Liquidation Routes

Creditors’ Voluntary Liquidation (CVL)

• Shareholders pass 75% special resolution.
• Creditors confirm liquidator.
• Liquidator files director conduct report.
• Assets distributed in statutory order.

Members’ Voluntary Liquidation (MVL)

• Directors swear Statutory Declaration of Solvency (IA 1986 s.89).
• Debts must be payable in full within 12 months.
• Swearing without reasonable grounds is a criminal offence.
• Surplus distributed to shareholders.

Compulsory Liquidation

• Creditor petitions court (commonly if debt exceeds statutory threshold).
• £343 court fee + £2,600 deposit.
• Official Receiver initially appointed.
• Mandatory director investigation.

Creditor Priority

In liquidation, distributions follow statutory order:

1. Fixed charge holders
2. Insolvency expenses
3. Preferential creditors (including certain employee claims)
4. Secondary preferential claims (including certain HMRC taxes)
5. Floating charge holders
6. Unsecured creditors
7. Shareholders

Costs Overview

Cost	Strike-Off	CVA	CVL/MVL	Compulsory
Filing	£13 / £18	None specific	None specific	£343
Deposit	N/A	N/A	N/A	£2,600
IP fees	Not required	Agreed with IP	Agreed with IP	May arise later

Administrative restoration fee: £341 (Companies House fee only; additional costs may apply depending on circumstances).

FAQs

One Clear Next Step

If your company is under pressure, speak to a licensed insolvency practitioner promptly. Early advice reduces the risk of wrongful trading exposure, disqualification proceedings or procedural missteps.

Gather:

• Recent accounts
• Creditor list
• Bank statements
• Tax correspondence

Acting early preserves options, and protects you personally.