Creditors' voluntary liquidation

A company director can ask shareholders to put an insolvent company into liquidation. This is known as a creditors’ voluntary liquidation.

A company is insolvent when it’s unable to pay its debts, either:

• when they're due
• because its liabilities (what it owes or will need to pay) are more than its assets (what it owns)

Shareholders can voluntarily liquidate the company by voting and passing a resolution to wind the company up.

This means the company will stop trading and be ‘wound up’.

Once shareholders pass the resolution, there are 3 steps which must happen next:

1. The shareholders appoint an authorised insolvency practitioner as liquidator to take charge of winding up the company.
2. The company or appointed liquidator sends the resolution to Companies House within 15 days of passing the resolution.
3. The company or appointed liquidator advertises the resolution in the Edinburgh Gazette within 14 days of passing the resolution.

Your responsibilities as a director will change.

Send a statement of affairs to the company’s creditors

The directors must prepare and send a statement of the company’s affairs to all the company’s creditors. You must do this within 7 days, starting from the day after shareholders passed the winding-up resolution.

You can download a non-statutory template statement of affairs from the Accountant in Bankruptcy’s website. The use of this template is not compulsory and it is a guide only. There may be additional statutory content you need to include.

If you are unsure what to include, you should get advice from a solicitor, your accountant or an insolvency practitioner.

The directors must deliver the statement of affairs to the liquidator as soon as reasonably practicable after the liquidator is appointed.

Creditors' choice of liquidator

You must ask the company's creditors to nominate a person to be the liquidator. They can nominate the same liquidator the company appointed or appoint someone else to take over. If the creditors do not nominate a liquidator, the company appointed liquidator continues in the role.

You must send the creditors a notice seeking their decision. You set the date they must decide by – this is called the decision date.

The decision date for the appointment of the liquidator must not be:

• earlier than 3 business days after the delivery date of the notice seeking the creditors’ choice
• later than 14 days after the date shareholders passed the resolution to wind the company up

In the notice you should ask creditors' to make their choice by either:

• a deemed consent procedure
• a virtual meeting

If the creditors' want a physical meeting

A physical meeting of creditors can only be held if both:

• the decision for the nomination of liquidator was first sought by deemed consent
• the required level of creditors request it

The liquidator appointed by the company should be able to advise what the required level is.

Where the appointment of a liquidator is sought at a physical meeting a new decision date is set. This decision date must not be:

• earlier than 3 business days after the delivery of the notice seeking a decision by deemed consent
• later than 14 days after the required level of creditors requesting a physical meeting is reached

The liquidator nominated by the company must also attend any physical meeting. The liquidator can appoint someone to attend for them instead.

What happens at a virtual or physical meeting

At the meeting the company's creditors can:

• question company directors about the company's failure
• suggest and appoint  an alternative liquidator