What are the Effects of Liquidation on a Company?
The principle effects of liquidation are that the limited company stops trading immediately, and the directors role ends. A liqudator will close down the company, make employees redundant and sell off assets for the benefit for corporate creditors.
Read our complete guide to the consequences of company liquidation below.
Understanding the Effects of Business Liquidation
For company directors, the effects of liquidation may be more far reaching. There will certainly be an investigation into directorial conduct in the period preceding the insolvency which could results 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 effects 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. 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 seeing professional advice immediately to understand the implications.
Do You Need Free, Confidential Advice
Our team of experts is at hand throughout the day on live-chat or by telephone. Or you can email us to schedule a call at your convenience, and always in the strictest confidence.