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Which option is best: Voluntary Liquidation, Compulsory Liquidation or Dissolution?

03 April 2017 - 10:12

Which option is best: Voluntary Liquidation, Compulsory Liquidation or Dissolution?

A Creditors’ Voluntary Liquidation, or CVL, allows the Directors and shareholders of a Company to take control of the negative situation they find themselves in.

With a CVL, the Directors choose a Licensed Insolvency Practitioner to act as their nominated Liquidator and work with him or her to bring the Company to an organised and controlled conclusion.

The CVL process will typically take less than a month and there is no Court involvement. A meeting of creditors will need to be held but it is, in truth, rare that creditors attend these with most seeing it frankly as a waste of their time.

Where the Company has physical assets, cash at bank or outstanding, collectible, debtors monies due in, the Liquidator’s fees will be paid by these without any cost to the Directors.

Having selected an Insolvency Practitioner that they feel comfortable with, the Directors will then, if they desire, be able to negotiate with him or her a sensible value for any assets which they may wish to purchase from the Company and, if they wish, they will be able to ensure that they are able to start up a new Company, without the baggage of debts carried by the existing one.

Compulsory Liquidation

A Compulsory Liquidation is normally the result of a creditor, usually but not exclusively HMRC, issuing a Winding Up petition against the Company.

In Compulsory Liquidation the Court, or the creditors, will choose the Liquidator, with a government representative called the Official Receiver often fulfilling that role, especially where there are limited assets available.

With the Compulsory route the Company’s bank account will usually be frozen prior to the Court hearing and it is illegal for Directors to sell assets after the Winding Up petition has been issued.


Dissolution is a route by which a Company can be struck off the Companies House Register without first going through a Liquidation process. However, before a Company can be dissolved creditors must be written to and given the opportunity to object. It is rare that HMRC will allow a Company to be struck off where it has outstanding liabilities.

Even if the Company is dissolved without paying its outstanding debts it is possible for creditors to have the Company restored to the Register at a later date in order to pursue the debts once more. This option therefore fails to give the closure to the situation which Liquidation provides.


Where a Company has outstanding liabilities which, with the best will in the world, it is unable to pay, the option of Creditors’ Voluntary Liquidation provides the Directors with the best method of controlling the situation.

Where the Company has no assets and the Directors would have to pay for the CVL themselves, it is for them to decide how much they are willing or able to pay for the peace of mind which the Voluntary Liquidation option provides. At S P Ford & Co we are sensitive to such situations and happy to negotiate a sensible cost to make this option affordable wherever possible.