Difference between Liquidation and Dissolution
Liquidation and dissolution are different processes. Dissolving a company is appropriate when debt can be settled within 12 months. Liquidation involves selling assets to pay creditors. Liquidation requires an insolvency practitioner.
Personal Liability for Business Debt
Whether you are liable for business debt depends on your business’s legal structure and guarantees signed. Sole proprietors face the highest personal risk as creditors can pursue personal assets.
Handling Debts during and after Dissolution
When a company is dissolved, its debts do not disappear. Creditors can still pursue unpaid debts. Directors and shareholders may have personal liability if dissolution is improper.
Closure of a Company with Debts
You have two options for closing a limited company with outstanding debts in the UK, with Creditors Voluntary Liquidation (CVL) being the common option. In a CVL, all company debts will be written off.
Liability of Dissolved Companies
Directors of a dissolved company can be appointed directors of other businesses if the dissolution is done in accordance with legislation. Debts must be repaid before a company can be dissolved.