“How do I liquidate my company?” A common opening question when directors take that step to call PBC and it is indicative of the (wrong) perception of what must be done when a company is in financial difficulties.
The fact remains companies that are in financial difficulties have numerous options, all designed to address the size and nature of a business, together with the issues the company is experiencing. For example, companies with an annual turnover in excess of £10 million may consider a Corporate Restructuring Plan. Readers may recall Thames Water were in court in 2025 due to unmanageable levels of debt. That was proposals for a restructuring plan.
In general, companies have numerous options and these include (but not limited to:)
Administration
Administration is available to a company that is (or likely to become) insolvent. It is designed to protect a company whilst plans are formulated to achieve one of the statutory objectives. Administration is also available to a partnership and reference below to company and directors should be read as partnership or partners.
Pre-pack sale
A sale of the business is agreed but not completed until the administrator is appointed when they sign off the sale agreement. Where there are common directors, an independent evaluation of the potential sale must be obtained.
Company voluntary arrangement
A Company Voluntary Arrangement is a procedure which enables an insolvent company to reach an agreement with its creditors to delay or compromise the payment of its debts. A CVA is flexible and can be adapted to meet the needs of any business and allows a company to propose repayments in line with what is affordable.
Creditors voluntary liquidation
Creditors’ Voluntary Liquidation is a procedure whereby the directors of an insolvent company can voluntarily take steps to wind up the company. A CVL is designed to dispose of the company assets and distribute proceeds to creditors. CVL’s are the most common form of insolvency in the UK.
Compulsory liquidation
This is where a creditor of the company is owed £750 (or more) and petitions the court for winding up as a debt enforcement process. If the winding up order is made the regional official receiver becomes liquidator in the first instance.
Some of the other formal procedures can be used as a means to defeat a winding up petition, provided there is a clear benefit to the company creditors as a whole.
The above are the more common options available and there are times a company will use more than one of them during its time under an insolvency regime. However, the key message is the sooner directors take advice, the more options that are available, which is important on may levels, including preparation for the possible legacy following the company entering a specific process.
If you need any advice on the appropriate way forward for your business, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 033150 (Milton Keynes), 01234 989150 (Bedford) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.