The principal effects of liquidation are that the limited company stops trading immediately, and the director’s role ends. The company will stop doing business. A liquidator will close down the company, make employees redundant and sell off assets for the benefit of corporate creditors. Once it’s been removed (‘struck off’) from the register at Companies House, the company will not exist.

Read our complete guide to the consequences of company liquidation below.

Consequences of Liquidation

Understanding the Effects of Business Liquidation

For company directors, the consequences of liquidation may be more far-reaching. There will certainly be an investigation into directorial conduct in the period preceding the insolvency, which could result in charges of wrongful trading. This means that directors acted in a way that did not prioritise the interests of creditors, such as selling off assets at undervalue or paying one creditor in preference to another.

» MORE Read our full article on Wrongful Trading

The consequences of liquidation are:

  • directors powers cease
  • employees are made redundant
  • the liquidation will be publically advertised in the Gazette, a journal of public record
  • assets are realised (sold) and distributed to creditors in order of priority. The remaining funds are distributed to shareholders as dividends
  • business debts are written off (except those ‘personally guaranteed‘)
  • any legal proceedings against the business come to an end
  • the company will be struck off the register at Companies House, ceasing to exist

Our Insolvency Practitioners’ Insights

For directors, the consequences of liquidation can be primarily one of great relief, as the business liabilities are discharged.

Assuming there is no misfeasance, overdrawn directors loans, or personal guarantee documents signed, all of the company debts end with the company itself.

If any of these factors are in place, it’s worth seeking professional advice immediately to understand the implications.

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