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A Director’s Prerogative – How to wind up your company.

It is not always at the request of a creditor that the court puts a company into liquidation otherwise known as a Creditor’s Petition in some cases it is the director(s) of the company who makes the request.

Insolvency is not always the reason a company is placed into liquidation, sometimes it is just the opposite i.e. a company is quite profitable and the goal is to retain the profits but close down the business in order to start something new.

Depending on the situation, there are three ways in which a company can be closed down by its management:

  • Compulsory Liquidation
  • Creditors’ Voluntary Liquidation
  • Members’ Voluntary Liquidation


Compulsory Liquidation

  • This is a court based procedure.
  • It is started by the presentation of a petition by the company’s director(s) at court with regard to the closure of the company.
  •  Following the hearing of the petition, a judge then makes the decision as to whether or not to make an order for the closure of the company.
  • This process is most commonly used when conflict exists between the director(s) and/or shareholders of the company.
  •  Further information detailing the steps of this procedure can be found in the compulsory liquidation guide.

Creditors’ Voluntary Liquidation

  •  This is an out of court based procedure.
  • It is often instigated by the director(s) because a company is insolvent and it is an alternative to the company being wound up by the court on a creditor’s petition.
  • The assets of the company are sold and the proceeds are distributed to the company’s creditors.
  • At the end of the liquidation the company is dissolved.
  • This is often a complex process and the steps of this procedure can be found in the creditors’ voluntary liquidation guide.

Members’ Voluntary Liquidation

  • This is an out of court procedure instigated by the director(s) of a solvent company.
  • The critical feature of this process is that all creditors of the company should be paid in full.
  • A company can only go into a members’ voluntary liquidation if the director(s) are prepared to swear a statutory declaration of solvency.
  • The declaration is a statement made by the majority of directors to the effect that having made a full inquiry into the affairs of the company, they are satisfied that the company will able to pay the entirety of its debts together with any interest within a specified period not exceeding 12 months from the commencement of the winding up.
  • Further details can be found in Members’ Voluntary Liquidation guide.


Regardless of the financial position, should you wish to close down your company, we are here to help.


For further advice or assistance please call 0800 088 6004