Can You Wind Up A Company Without A Liquidator?

Can you wind up a company without a Liquidator? Yes, you can wind up a company without a Liquidator. However, you cannot liquidate your company yourself. 

Liquidation is a formal insolvency procedure that can be applied to a solvent or insolvent company. It is a form of winding up provided in the Insolvency Act 1986.

What Is Winding Up A Company?

Winding up a company without appointing a Liquidator can only be done if it is not going into Liquidation. This process is known as dissolution or strike off under Section 1003 of the Companies Act 2006.

It is not permissible to wind up an insolvent company without going into Liquidation except if you follow the strict procedures set out in form DS01 to strike off the company and notify creditors by providing them with a copy of this strike off form as required by Section 1006 of the Companies Act 2006.

A Director who attempts to wind up a company without notice being provided to creditors using the strike off route will be guilty of an offence and be at risk of director disqualification proceedings.

The strike off (dissolution process) results in an advertisement being placed in the Gazette which is an invitation to persons with an interest in the company (typically creditors) to object to the winding up. This will then give them an opportunity if they wish to put the company into Compulsory Liquidation. It is an action typical of HMRC and creditors such as banks owed a Bounce Back Loan.

When using the strike off procedure to wind up a company you will want to ensure all its assets (such as money in the company bank account) are removed as part of the process of stopping trading the limited company. Otherwise, any remaining property will bona vacantia and left to the Crown. When the process is complete Director can move onto new ventures or retire for example.

Advantages Of Winding Up A Company

Winding up a company without a Liquidator will enable the Directors to maintain control of the company. That means the Directors will determine how the winding up procedure is undertaken in terms of what happens to the assets and the process of ceasing to trade.

It is also an inexpensive procedure in comparison with Liquidation.

Disadvantages Of Winding Up A Company

The disadvantage of winding up a company without a Liquidator is if the company is insolvent the Director’s distribution of the assets might contravene the statutory order of payment. This could result in preference payments or transactions and an undervalue which could potentially be clawed back at a later date if the company was put into Liquidation. 

If a company is insolvent it is very likely a creditor such as HMRC will object to the winding up being undertaken through the dissolution route. This means it is likely the company will go into Compulsory Liquidation and the Directors will have to deal with the Official Receiver who is the Liquidator appointed by the Court in the first instance.

If a company is solvent then winding up without going into Liquidation is not usually the most tax efficient procedure. In what is called a Members Voluntary Liquidation there are potentially useful tax savings such as Business Asset Disposal Relief (formerly known as Entrepreneurs Relief) which may be available. This can enable tax on a distribution of assets to be paid at lower Capital Gains rates as opposed to it being treated as income and therefore subject to income tax.

In the case of an insolvent company Director redundancy claims are not available except if the company goes into Credtiors Voluntary Liquidation.

A company can be reinstated when it is struck off and still placed into Liquidation. As a result, dissolving a company is not typically as final as a Liquidation. Furthermore, the Insolvency Service now has powers for investigation of dissolved company Directors. It therefore follows if you want to wind up a company once and for all Liquidation would be more likely to achieve this with less risk of reinstatement and reopening of matters.