What is a Directors Liquidation?

What is a Directors Liquidation?


What is a directors liquidation when it comes to insolvency proceedings of a company which might be insolvent and what the directors can do about it? If a company is insolvent and continues to trade then the directors could be held liable for wrongful trading.

So what remedy do directors have to call a directors liquidation of a company. As a director of a company if you feel or know the company is insolvent and cannot pay its debts then you need to stop trading and seek the advice of a good Insolvency Auditor to help you to cease trading and to help you find optional ways of avoiding any further liabilities in the event of wrongful trading. The insolvency auditor will explain the best course of action needed to do a directors liquidation of your company whilst minimizing your liabilities and exposure from future liabilities as well.

What is the main difference between a directors liquidation and a compulsory liquidation? The directors liquidation is a voluntary liquidation by you and the compulsory liquidation which is a court lead liquidation ordered by a creditor or creditors of the company.

Depending on the amount of debts the company has, you might have a number of options open to you provided you feel the company has a viable business but for the debts. You have the options of a CVA, pre-pack administration, voluntary liquidation, a company administration order or just simply liquidate the company and walk away with minimal liabilities.

If you can gather some information about the company the number of creditors and the amounts outstanding along with what the company is owed from customers (if anything) and what assets the company has. Then simply give me a call on 0800 24 0800 we can probably run through a few options which might be open to you regarding a directors liquidation of your company.

On the other hand if the company has no debts then simply go to companies house and ask them to remove your company from the register, there is a small fee of about £10 to companies house. But this is only if the company has no debts otherwise you will have seek the advice of an insolvency auditor to guide you through the various option open to you for a directors liquidation of your company.

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Insolvency Advice for Company Director

Insolvency Advice for Company Director


Anybody who has past or present experience of running a company knows that it is both a challenging and demanding task. Several aspects of the business always seem to need constant attention and management, so it understandable under certain circumstances that businesses become insolvent. As the director of a company, the implications of insolvency and bankruptcy are very significant, and under certain circumstances, the company directors can be made individually accountable for the company’s debts. For example, if a company continued to trade despite being insolvent, the director may become liable for its debts.

Insolvency Advice for Company Director 

A company may be wound up because it has failed to pay certain creditors, so one or several of the creditors may file for a winding up petition. Many creditors feel disgruntled due to the money owed to them, and do their best to encourage an investigation into the director’s conduct, to see if the insolvency could have been prevented if the director had acted in different ways. This is a huge amount of pressure for a company director to be under.

If a business has been wound up, whoever liquidates the company (closes the business and sells its assets) will, in most cases, investigate the director of the company. They can also investigate anyone who assumed an unofficial role of directorship in the three years before the company was wound up.

Wrongful Trading By Directors 

The investigation will determine whether or not the director acted appropriately in the given circumstances, and also whether they made decisions that were favourable to their creditors and their business, not just for personal gain. Under the 1986 Insolvency Act, companies are not allowed to trade when they know that they are insolvent, and this will be checked in the investigation. This illegal practice is known as “wrongful trading”, and if a company is found to have traded wrongfully, the implications for the director are very serious.

The Insolvency Service will then look into the investigation that the liquidator has carried out, and if the liquidator has found any misconduct on behalf of the director, in their report they will recommend that action is taken against the director.

Directors Disqualification 

There are usually two types of action that can be taken against the director. Firstly, they may receive a Director’s Disqualification for a fixed period of time. Secondly, they may become personally liable for debts acquired at the now insolvent company which they held a directorship at. You can see what a serious situation this is for a company director to be in, the future consequences are severe and drastic, and can have a negative effect on a person’s income and their credit rating.

Each business has completely different circumstances surrounding the winding up of the company. If you are a director of a company that fears the future implications of insolvency for your business, speak to a professional Insolvency Auditor who is experienced in dealing with insolvent businesses. The insolvency auditor will help you to assess your current situation and the consequences of the decisions you make for your business.

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