However, perhaps the main benefit of this option is that it allows directors to close their company in a tax-efficient way.
This is an easy way to close a company and free up funds. Here, a company director will choose to close their company, whether that is because they are planning on retiring, moving abroad, taking a step back within the company or no longer has use for the company.Īgain, as a formal insolvency procedure an Insolvency Practitioner must be appointed to carry out the MVL. Unlike with both compulsory liquidation and Creditors’ Voluntary Liquidation, a Members’ Voluntary Liquidation is a route open only to solvent companies. Next, we will look at each type of liquidation in more detail. When it comes to liquidation, there are 3 main types. However, it is worth bearing in mind that you can dissolve a company without going through liquidation. Meetings will need to be held with company shareholders and creditors, 75% of which must agree to the liquidation for it to proceed.Ĭonfusion between liquidation vs dissolution may occur due to the fact that when a company goes into liquidation it is ultimately dissolved and struck off the Companies House register. To liquidate a company, a licensed Insolvency Practitioner must legally be appointed to oversee and carry out the process. These assets and liabilities will need to be broken down and redistributed to the shareholders and creditors of the company. On the other hand, liquidation is a formal means of closing a company when there are still assets and liabilities to be dealt with. This could be because the director chooses to move abroad, no longer has a purpose for the business or wishes to retire.ĭissolution is not a way to close down a company that has debts in hope of writing them off, however.Īlthough this is usually a voluntary process initiated by the company director, Companies House can also dissolve a company involuntarily for ‘non-compliance.’ Why dissolve a company?ĭissolving a company is useful when the company no longer has a use and has fulfilled its purpose. When a company is dissolved, it remains on the Companies House register marked as “dissolved.” It will stay this way for 20 years at which point it will be archived and will no longer be present on the register.
What is dissolution?ĭissolution means the end of the company as a legal entity. dissolution, Clarke Bell has put together this handy guide outlining what each term means as well as the key differences between both, so you know which option is right for you. To help you understand the difference between liquidation vs. However, they are two different processes that mean different things. Looking to raise finances for your company?ĭissolution and liquidation are terms that can sometimes get confused and be used interchangeably.