What is the role of a liquidator?

What is a liquidator and how much does a liquidator cost? Neil Dingley of Moore Recovery in Stoke on Trent explains the role of a liquidator and how they are appointed.

What Is a Liquidator UK

What is a liquidator?

A liquidator is a licensed insolvency practitioner (IP) who oversees the liquidation of a company. A liquidator is appointed by:

In both MVLs and CVLs, the liquidator is appointed by the members. There is no Official Receiver (OR) involvement. In CVLs, the creditors can also either sanction the appointment of the members’ choice of liquidator or put forward their own alternative IP.

In a compulsory winding up, the OR initially acts as liquidator. However, in some cases the OR will appoint an external IP. This generally happens at the request of one or more of the creditors, or if there are matters that are time sensitive and need immediate attention.

Both ORs and IPs are officers of the court and are granted various powers under insolvency legislation. Their role is governed by the Insolvency Act 1986, The Insolvency (England and Wales) Rules 2016, Statements of Insolvency Practice (SIPs) and the rules of their registered professional bodies (RPBs), and their powers include:

  • dealing with employees
  • realising assets for the benefit of the liquidation estate
  • liaising with creditors
  • making a return to the members and/or creditors, where appropriate

In an insolvent liquidation, such as a CVL or WUC, a liquidator has an obligation to investigate any events which took place prior to the liquidation (known as ‘antecedent transactions’) which have put creditors at a financial disadvantage in any way.

In a CVL and a WUC the liquidator also has a duty to investigate the conduct of a company’s directors and shadow directors. These investigations serve two purposes:

  1. the liquidator has an obligation to file a report on the conduct of the director(s) with the Insolvency Service
  2. they may lead to the recovery of assets for the benefit of the liquidation estate

What does a liquidator do?

Members’ voluntary liquidation

In an MVL the directors make a sworn statement affirming that within a period of 12 months the company will be able to settle its liabilities including any contingent liabilities, with statutory interest if applicable and pay the costs of liquidation. The appointed liquidator will make a return to the shareholders, in line with their shareholdings, of the monies held in the liquidation estate.

In order to identify any and all creditors who may be owed money by the company, an advertisement is placed in The Gazette requiring creditors to come forward and make their claims known to the liquidator. It is also customary for the liquidator to request an indemnity from the shareholders to the effect that if any creditor who had been ‘forgotten’ does come forward, the shareholders will make good any such deficit, therefore keeping the company solvent.

Insolvent liquidation

In an insolvent liquidation, ultimately the main role of a liquidator is to realise any remaining assets of a company and, if possible, pay its creditors. To do this, a liquidator will identify a company’s physical assets, appoint a specialist agent to value and sell them if necessary, pay any relevant costs of realisation and account for receipts and payments in the liquidation estate.

A company may have secured creditors (such as debenture or fixed charge holders), preferential creditors (former employees for an element of what is due to them, and HMRC as secondary preferential creditor for liquidations commencing after 1 December 2020), unsecured creditors (such as trade creditors and utilities), or all three. If enough realisations have been made from a company’s assets, a liquidator will make payments in the following order:

  1. secured creditors (subject to Prescribed Part provisions under Section 176A of the Insolvency Act 1986)
  2. preferential creditors
  3. unsecured creditors who all rank equally and receive a pari-passu dividend based on the amount left in the ‘pot’ and the level of claims made


A liquidator also carries out administrative tasks, both statutory and non-statutory, which include preparing and submitting paperwork to relevant interested parties, including but not limited to:

  • Companies House
  • the court in a compulsory winding up
  • creditors
  • employees
  • HM Revenue & Customs (HMRC)
  • pension providers and regulators
  • any licensing bodies
  • insurance providers

In addition, a liquidator has duties under SIPs to conduct an analytical review, based on initial information available, in order to assess whether there is a case for further, more detailed investigation into any aspect of a company’s affairs. In some cases, this leads to more detailed investigation work, which may or may not result in realisations for the benefit of the liquidation estate.

A liquidator may also need to instruct legal advisors in some cases and liaise with them to progress the realisation of assets, any litigation entered into as a result of their investigations, or the adjudication of contentious claims in the liquidation.

Who can appoint a liquidator?

A liquidator can be appointed by:

  • members in a solvent liquidation, where the sole purpose is to wind down the company and distribute assets to shareholders.
  • creditors in an insolvent liquidation, where directors determine that a company cannot carry on; that it is no longer a going concern and must enter into liquidation. Directors instruct an IP to assist them in the practicalities of placing a company in liquidation. Members/shareholders resolve for the company to be placed into liquidation, and lastly, creditors either ratify that appointment, or vote to appoint an alternative.
  • the court in a compulsory liquidation, following the petition of a creditor or the company, where the court orders that a company be wound up either because it is insolvent or on the grounds of public interest. Less commonly a liquidator can be appointed by the court as a provisional liquidator when a winding-up petition has been presented and a company continues to trade.

How much does a liquidator cost?

A liquidator can be paid by:

  • a fixed sum
  • a percentage of assets realised and/or distributions made
  • an hourly rate subject to costs estimated and agreed by creditors

If a liquidator’s payment is not agreed by creditors, a liquidator can apply to court to obtain consent to be paid for their work.

A liquidator’s costs depend on the complexity of the work required and the length of time required to move a company to dissolution. Inevitably no two liquidations are the same and costs will vary and sometimes exceed initial estimates – in which case a liquidator is required to consult with creditors for further agreement for additional payment.

About the author

Neil Dingley is an Insolvency Practitioner and Partner of Moore Recovery in Stoke on Trent and has a background in information technology and accountancy.

See also

A guide to creditors' voluntary liquidation (CVL)

A guide to members' voluntary liquidation (MVL)

How does the winding up petition process work?

What are the responsibilities and duties of a company director?

Find out more

Insolvency Act 1986 (Legislation)

The Insolvency (England and Wales) Rules 2016 (Legislation)

Statements of Insolvency Practice (SIPs) England and Wales (ICAEW)

Image: Getty Images

Publication date: 26 January 2021

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.