The Debt Advisor Logo The Debt Advisor Logo
Request a callback
blog

Dissolution Vs Liquidation Made Simple

Published on:March 5, 2019Author:alex

Article by Laura Walshe of The Business Debt Advisor

At the end of last year, there were over 4 million companies on the Companies House register, which included those in the process of dissolution and liquidation.

From October to December 2018 alone, there were 158,841 incorporations and 112,121 dissolutions.

Even with seasonal fluctuations in statistics, the overall number of dissolutions continues to increase over time.

Comparatively there were 40,853 (57.3%) more dissolutions in the final quarter of 2018, than in 2012.

But what is the difference between Dissolution and Liquidation?

Dissolution

Companies House produced a comprehensive guide to strike off, dissolution and restoration, which can be found here.

The process starts with an application for voluntary striking off, which can only be made on behalf of the company by its directors or a majority of them.

The process itself is simple and involves the submission of Form DS01 with a small fee of £10.

The procedure can only be used if the company is solvent and has not been involved in any of the following activities during the last 3 months, before application:

  • Changed its name
  • Continued trading
  • Engaged in any activities other than those necessary for the purpose of dissolution

A company cannot apply for voluntary striking off if it is the subject of any insolvency proceedings or proposed proceedings. This includes an outstanding winding up petition or an existing arrangement between the company and its creditors.

In 2018, the government entered into consultation on Insolvency and Corporate Governance. The aim was to reduce risk associated with company failures.

In view of the responses, the Government now intends to give The Insolvency Service powers to investigate directors of dissolved companies, if they are suspected of having acted in breach of their obligations.

If any of the above restrictions are applicable, or you are uncertain as to your obligations, then you should seek professional advice about the options available.

Voluntary Liquidation – Made Simple

It has been well publicised that The Insolvency Rules (England and Wales) 2016 had wide-ranging implications for the insolvency regime.

The purpose of these changes was to enable use of modern communication and streamline insolvency processes.

So what does this mean for directors?

Directors were previously required to attend meetings of creditors in person, most commonly the meetings in insolvent liquidation.

This understandably caused apprehension about whether those involved would be questioned about the reasons for failure.

It is now quicker and easier to wind up private limited companies.

New decision processes allow for virtual meetings and approval can even be obtained by deemed consent (a simple ‘yes’ or ‘no’ to certain resolutions). The new rules provide that a physical meeting cannot be convened unless this is requested by certain majorities.

There are many other reasons why it makes sense to use the voluntary liquidation process.

If you have any concerns about your exposure to risk then please fill out our Contact Formand we will be in touch.

Alternatively, call us on 0800 781 0990. Our team has extensive experience and can arrange an initial consultation at no cost, usually on the same day.