The five steps involved with company liquidation

The five steps involved with company liquidation

Liquidation can be a complex process, but understanding it can help you prepare for the worst possible scenario. It’s highly likely that your business is insolvent if you’re in a situation where you have very rapidly run out of cash, and one of the most severe forms of insolvency is liquidation.

If you think your business is heading down this route, it’s vital that you know the process. The steps below break down the liquidation process.  

Appoint a liquidator 

To liquidate your business, you need to appoint a qualified liquidator. Initial meetings will help the liquidators to gain an understanding of your business and its current financial situation. After this they will decide which form of liquidation is best for you. This can either be a CVL (Creditor’s Voluntary Liquidation), MVL (Member’s Voluntary Liquidation) or another process. 

If the Directors of the business are intending to close the business permanently, a Company Liquidation will take place. This means the Powers of the Director will be passed over to the Liquidator who will have full control of the company’s affairs. 

An investigation will begin

At this point the liquidator will collect all the information they need such as records, books, company assets including any non-physical, and cash and book debts. This will allow the liquidator to assess the situation you’re in and help them to decide on the next steps. 

Directors are responsible for providing a full list of creditors, with details including names, business addresses, as well as the exact amount owed with reference numbers. The liquidator can use this information to decide who should be paid, and in what order. 

Also Read: How to restrict shipping to logged-in WooCommerce users

Creditors will be informed

From here, the liquidator will issue a formal notice to the companies creditors, explaining that you’re going into liquidation. They will also provide them with details on when they should expect to be paid. 

Valuation of assets

Liquidators will take the time to value every single asset that the business owes based on the list of assets they collected during the investigation process. From the final sum, the cost of the liquidators is deducted as well as voluntary liquidation costs, then all of the other creditors are paid in order, until the money has been used up. 

Staff are managed 

The liquidation process means all staff are made redundant. The liquidators are responsible for dealing with this, and any other employee claims. They will also investigate the conduct of the Directors. If it’s found that the Directors passed the point of recognising any cash flow problems and didn’t seek advice, they can be held personally liable and can be seen as wrongfully trading. In extreme cases, Directors can be disqualified for up to 15 years and can become personally liable for a percentage of the company’s debts.

Over the past couple of years this changed slightly due to the pandemic as many business owners relied on the Government’s support. There were restrictions on running claims for wrongful trading made during the pandemic, so liquidators assessed how your business was performing pre-covid to ensure you weren’t delaying seeking any assistance – this is something that is still a part of the preparation process to see how the business was operating across the past few years.


IITSWEB is the Chief Business Development Officer at IITSWEB, a Magento design and development company headquartered in Redwood City, California. He is a Member of the Magento Association and an Adobe Sales Accredited Magento Commerce professional. Jan is responsible for developing and leading the sales and digital marketing strategies of the company. He is passionate about ecommerce and Magento in particular — throughout the years his articles have been featured on Retail Dive, Hacker Noon, Chief Marketer, Mobile Marketer, TMCnet, and many others.

View all posts by IITSWEB →

Leave a Reply

Your email address will not be published. Required fields are marked *