Insolvency for Limited Companies

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Companies House Insolvency FAQs
How to Wind Up Your Business – Guide

If you have sought business advice (for insolvency advice click here) and company liquidation is an unavoidable reality it is important to know the implications of insolvency for a Limited company. This page will therefore explain what insolvency means for Limited Companies.

Liquidation

Businesses that have gone into liquidation because assets have been sold to creditors fall into one of two categories:

1) Compulsory liquidation: Creditors owed more than £750 have asked the courts to wind up your business. This is known as a compulsory liquidation and is only available to creditors owed in excess of £750.
2) Voluntary liquidation: Shareholders can also wind up the business and ask creditors to appoint a liquidator. This is known as voluntary liquidation.

Company Voluntary Agreements

You can appoint an Insolvency Practitioner to arrange a company voluntary agreement with your creditors. The Insolvency Practitioner will meet with creditors and negotiate a repayment plan based on what you can afford to pay.

Need help closing down your business? See top of page to download How to Wind Up Your Business. For more information on IVAs click here.

Administrative Receivership/Business Administration

When a receiver takes control of the business uk, it is known as administrative receivership or business administration. The receiver, appointed to pay off the firm’s creditors decides whether to sell the business as a going concern or wind it up. Only a secured creditor such as a bank for example, can appoint a receiver. It is not uncommon, however, for directors can also ask for a receiver to be appointed – especially if wrongful trading poses a concern. Administrative receivership is only available to limited companies.

Administrative

A business administrator has the responsibility of resolving company insolvency problems and if possible re-establish the business as a going concern. A court, creditors or business owners usually appoint business administrators. An administrator would also run the business and call creditors before deciding on a course of action.

An administrator has two objectives:

1) To rescue the business if there is means to do so
2) To seek the best possible outcome for business creditors (usually preferential secured creditors)

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