What Happens After Liquidation Of A Company?

empty office with packing boxes

If you’re considering liquidating your company via a Member’s Voluntary Liquidation (MVL) or a Creditor’s Voluntary Liquidation (CVL), then you’ll want to know the ins and outs of the process. Specifically, you may be concerned about what happens after liquidation. What’s the situation for directors and employees, and what happens to shares and assets? Let’s take a look at what happens after liquidation for all interested parties in the company. 

What Happens To Assets After Liquidation?

As the company liquidation process comes to an end, the primary concern is selling the assets in order to repay creditors and shareholders. There may be an opportunity for directors to purchase an asset at the going rate, depending on the individual circumstances of the liquidation. Once all the assets have been sold, the company is closed and struck off the Companies House register. 

What Happens To Shares After Liquidation?

Unfortunately, in the majority of cases it’s very rare for shareholders to receive any capital from the sold assets. While solvent companies may choose to liquidate for various reasons such as retirement, or a change in career path, many companies liquidate when they do not have the money to pay their debts. This means that any money made from assets is given to creditors as priority. Once a company is liquidated, the shares become worthless. For investors, this means they can be declared as a capital loss and removed from the portfolio. 

What Happens To A Director After Liquidation?

One of the main concerns that directors have when thinking about what happens after liquidation, is where the process leaves them for the future. Following the liquidation process, the liquidators will conduct an investigation in order to determine whether there is any evidence of directors engaging in wrongful or fraudulent trading whilst the company was insolvent. It’s essential that directors instruct a licensed insolvency practitioner at the first signs of financial trouble in order to ensure they are taking the correct steps forward, and not at risk of trading whilst insolvent. There is nothing stopping a director from setting up a new business in the future, so long as there was no fraudulent or wrongful activity identified in the investigation. If you’re setting up a new business after liquidation, it cannot have the same or similar name to the liquidated company for five years after the liquidation. 

What Happens After Liquidation For Employees?

Employees receive any unpaid wages via the sale of assets, including holiday pay, sick pay and any other outstanding amounts. In this sense, they are treated as creditors. Employees can also claim for redundancy pay when the company enters liquidation, including statutory entitlements. If employees are unable to receive full redundancy payments from their employers, they can claim from the National Insurance Fund

Can A Company Be Reinstated Following Liquidation?

Another question you may have regarding what happens after liquidation, is whether or not the company can be reinstated. The answer to this is “yes”, however the process for this  depends on how the company was dissolved. If the business was dissolved voluntarily, then it will need to be restored by the court. This may be the route taken by creditors owed money by the company which may be restored temporarily so that assets can be recovered. The other option is administrative restoration which must be made within six years of the company’s dissolved date by either a former director or a member of a limited company. The process for this can be costly and time consuming and so it’s important to seek professional legal advice from the start. 

If you have any further questions regarding what happens after liquidation, or you would like to discuss the liquidation options that are available for your company, please don’t hesitate to get in touch with our experienced team of licensed insolvency practitioners for an initial consultation. 

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