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How to Liquidate a Company: Your Options as a Shareholder Explained

RJP LLP By RJP LLP
How to Liquidate a Company: Your Options as a Shareholder Explained

Published by RJP LLP – Chartered Certified Accountants & Tax Advisers

If you’re a shareholder in a private limited company and thinking about closing it down, you might be wondering: What’s the best way to liquidate my company?

Whether you’re retiring, restructuring your business affairs, or simply winding things up, understanding your options is essential — not just for compliance, but for maximising tax efficiency.

At RJP LLP, we help many business owners make smart decisions when exiting a company. In this article, we explain the different ways to liquidate a company in the UK, depending on your goals and financial position.

Members’ Voluntary Liquidation (MVL): Tax-Efficient Closure for Solvent Companies

Ideal for: Shareholders looking to exit a solvent company and extract profits tax-efficiently

An MVL is a formal process used to close down a company that can pay all its debts in full. It’s particularly attractive for directors and shareholders who want to unlock the value in their company in a tax efficient way.

Why choose an MVL?

• You’re retiring, restructuring, or no longer need the company
• You want to benefit from Business Asset Disposal Relief (formerly Entrepreneurs’ Relief)
• Distributions are taxed as capital, often at between 14% and 24%, rather than income

RJP Tip: If your company holds more than £25,000 in retained profits or assets, an MVL is usually more tax-efficient than striking off.

We work closely with licensed insolvency practitioners to ensure a seamless MVL process, from start to finish.

Creditors’ Voluntary Liquidation (CVL): When Your Company Is Insolvent

Ideal for: Directors whose company can no longer meet its debts

A CVL is the route to take when a company is insolvent and cannot recover. It allows for an orderly closure while meeting legal obligations and protecting directors from wrongful trading accusations.

Key features:

• Directors propose liquidation, with creditors involved in approving the process
• Assets are sold to repay debts
• Shareholders typically receive nothing — the focus is on settling liabilities

RJP can advise on the financial and tax implications of insolvency and help you explore any viable alternatives before proceeding with a CVL.

Company Strike Off: Quick and Simple, but Only If Conditions Are Right

Ideal for: Dormant or inactive companies with no debts

If your company has ceased trading, has no outstanding liabilities, and holds minimal or no assets, you may apply for a voluntary strike off with Companies House.

Pros:
• Low cost, no need for a liquidator
• Straightforward paperwork
• Suitable for small or dormant companies

Cons:
• Any remaining assets can pass to the Crown (bona vacantia) if not distributed beforehand
• Tax implications if assets exceed £25,000 — in that case, an MVL may be better
Before proceeding, we recommend a review to confirm strike off is appropriate, and tax-efficient.

Which Company Liquidation Option Is Right for You?

Here’s a quick summary to help guide your decision:

Company Status vs Recommended Route

Solvent with significant assets – choose Members’ Voluntary Liquidation
Insolvent (can’t pay debts) – choose Creditors’ Voluntary Liquidation
Dormant/No debts or assets – choose Voluntary Strike Off

RJP Can Help You Plan an Efficient Exit

Liquidating a company is about more than shutting it down — it’s about planning an exit strategy that protects your finances and keeps you compliant. At RJP, our tax and business advisory team can guide you through the best approach based on your company’s status and your personal goals.

Whether you’re:

• Selling or restructuring
• Planning for retirement
• Dissolving an unused company

…we’re here to help you make informed, strategic decisions.

Talk to Us

Thinking of liquidating your company? Speak to one of our expert advisers at RJP LLP to explore the most effective route.

📩 Get in touch via partners@rjp.co.uk

RJP LLP is a firm of Chartered Certified Accountants and Tax Advisers working with owner-managed businesses across London and the South East.

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