A liquidator is a licensed insolvency practitioner appointed to close a company. They take control of its assets, sell them and pay creditors in an order set by law. They also look into why the company failed and report on how the directors acted.
Deciding to close a company is rarely easy, and many directors have never dealt with a liquidator before. Knowing what to expect can make the next steps feel much more manageable.
What this blog covers
In this guide, we explain:
- What a liquidator does
- The three types of liquidation
- What liquidation means for directors, employees and creditors
- How to choose a liquidator in Newcastle
- How Connect Insolvency can help
- Frequently asked questions about liquidators in Newcastle
What does a liquidator do?
A liquidator takes over a company so it can be closed in an orderly way. Once appointed, the liquidator takes control of the company’s affairs, and the directors’ powers are generally limited.
The liquidator’s main duties are to:
- Secure the company’s assets, such as stock, vans, machinery, property and money owed by customers
- Sell those assets for the best price they can reasonably get
- Agree the claims made by creditors
- Pay creditors in the order set by insolvency law
- Investigate the company’s affairs and the directors’ conduct
- Report to the Insolvency Service on how the directors acted
- File a final account at Companies House so the company can be dissolved
Only a licensed insolvency practitioner can act as a liquidator. Their licence comes from a recognised professional body, such as the ICAEW or the Insolvency Practitioners Association.
What are the three types of liquidation?
The three types are a Creditors’ Voluntary Liquidation, a compulsory liquidation and a Members’ Voluntary Liquidation. The right one depends on whether the company can pay its debts and who starts the process.
| Type | Can the company pay its debts? | Who starts it | Who acts as liquidator |
|---|---|---|---|
| Creditors’ Voluntary Liquidation (CVL) | No | The directors and shareholders | An insolvency practitioner chosen by the directors and confirmed by creditors |
| Compulsory liquidation | No | A creditor, through a court petition | The Official Receiver at first, sometimes replaced by an insolvency practitioner |
| Members’ Voluntary Liquidation (MVL) | Yes | The directors and shareholders | An insolvency practitioner chosen by the shareholders |
Creditors’ Voluntary Liquidation
A CVL is used when the directors of an insolvent company decide to close it themselves. The shareholders pass a resolution to wind up the company. Creditors then confirm the proposed liquidator or nominate another. Acting early can give directors more say over the timing and the process.
Compulsory liquidation
Compulsory liquidation starts when a creditor asks the court to wind up the company. This often follows an unpaid statutory demand. If the court makes a winding-up order, the Official Receiver usually becomes liquidator first. The company’s bank accounts will usually be brought under the control of the liquidator or Official Receiver. Our guide to receiving a statutory demand explains how to respond within 21 days.
Members’ Voluntary Liquidation
An MVL closes a solvent company that is no longer needed. The directors must swear a declaration that all debts will be paid within 12 months. Shareholders then receive whatever money is left. Owners who are retiring or selling up often use an MVL to withdraw funds from the company.
What happens to directors, employees and creditors?
Directors’ powers are limited, and most staff contracts end. Creditors are paid from whatever the company’s assets raise.
What happens to directors?
Directors’ powers are generally limited once the liquidator is appointed. The liquidator must then report to the Insolvency Service on how each director acted. This report is a routine part of every liquidation and does not mean a director is suspected of wrongdoing. Depending on the circumstances, directors who kept trading when they knew the company could not pay its debts can face personal liability. In serious cases, they can also be disqualified from acting as a director. Personal guarantees on loans, leases or supplier accounts stay in force after the company closes. This is why taking professional advice early is so important. GOV.UK sets out directors’ duties when a company is insolvent.
Some directors can claim redundancy pay too. Our post on claiming redundancy as a company director explains who qualifies.
What happens to employees?
Employment contracts usually end when the company goes into liquidation. Staff can claim certain unpaid wages, holiday pay, notice pay and redundancy pay from the government’s Redundancy Payments Service, subject to statutory limits. The liquidator supplies the information needed to process these claims. Read more in what happens to employees when a company enters insolvency.
How are creditors paid?
Creditors are paid from the money raised by selling the company’s assets. Lenders with a fixed charge, such as a mortgage over a building, are paid first. The costs of the liquidation come next. Preferential claims follow, including some employee claims and certain HMRC debts. Lenders with a floating charge are paid after that. Unsecured creditors, such as suppliers, come last and often receive only part of what they are owed.
How do you choose a liquidator in Newcastle?
Choose a licensed insolvency practitioner who explains your options clearly and sets out their fees upfront.
How do I check a liquidator is licensed?
Every liquidator must hold a current insolvency practitioner licence. You can check this on the government’s public register of insolvency practitioners.
How are a liquidator’s fees paid?
In a CVL, fees are usually paid from the company’s assets. A good firm explains how its fees are worked out before you commit. Directors sometimes contribute when the company has very little left. Connect Insolvency publishes its approach on the fees and costs page.
Does it help to use a local liquidator?
A Newcastle liquidator can make it easier to arrange face-to-face meetings to discuss the company’s situation.
Should a liquidator look at other options first?
Yes. Liquidation isn’t always the right answer. If the business or part of it could be rescued, an insolvency practitioner should consider alternatives such as a Company Voluntary Arrangement or administration. The earlier you seek advice, the more options may be available. Our guide to insolvency practitioners in the North East covers these rescue options.
How Connect Insolvency can help
Connect Insolvency is a firm of insolvency practitioners and liquidators in Westerhope, Newcastle upon Tyne. Licensed Insolvency Practitioner Simon Blakey leads the firm. It acts as liquidator in Creditors’ Voluntary Liquidations, Members’ Voluntary Liquidations and compulsory liquidations across the North East. The team also advises on rescue options such as Company Voluntary Arrangements and administration. Every company’s situation is different, so the team takes time to understand yours before recommending a way forward. The aim is always to give practical and impartial advice.
The first conversation is confidential and carries no obligation. Contact the team or call 0191 816 1416 to talk through your company’s position.
Frequently asked questions about liquidators in Newcastle
How long does a liquidation take?
A straightforward CVL can often be completed in around a year. Cases involving property sales, disputed claims or investigations into directors can take longer.
What is the difference between a liquidator and an administrator?
An administrator is brought in to save a struggling company, or at least to sell the business while it is still trading. A liquidator is appointed once the decision to close the company has been made. Their job is to sell what is left and pay creditors from the proceeds. Some companies go through both, starting in administration and moving into liquidation if a rescue isn’t possible. A licensed insolvency practitioner must fill either role.
Can a liquidator pursue me personally for company debts?
Depending on the circumstances, a liquidator can pursue directors personally. Examples include an overdrawn director’s loan account, wrongful trading and payments that favoured one creditor over others.
Can I be a director again after my company is liquidated?
In most cases, yes, you can become a director of another company. Strict rules limit the reuse of the old company’s name. Directors who are disqualified cannot act until their ban ends. Our guide to phoenix companies explains the rules on starting again after liquidation.
Where can I find liquidators in Newcastle?
Connect Insolvency is a firm of liquidators and insolvency practitioners based in Newcastle upon Tyne. The team provides confidential, practical advice to companies and directors across Newcastle and the wider North East.