Directors liquidation is an alternative term for the action that a director takes to close down, or wind up his business. It can be undertaken by him in court. This is Compulsory Liquidation.  More usually it is begun by calling in an insolvency practitioner, and asking him to call a meeting of creditors at which those creditors will be asked to vote to liquidate the company. This is known as a creditor's voluntary liquidation. The timescales for completing both types of liquidation will be two to three weeks.

Directors of a limited company are under an obligation to protect the assets of the company for the creditors, and to cease to incur further liability if it cannot be assured that that new liability will be repaid, once they are certain it is insolvent.

Directors who carry on recklessly can be made subject to wrongful trading actions, which can leave them personally liable to re-imburse creditors with additional losses suffered as a result of their mis-management.

I have completed other articles on this site dealing with the question of how you ascertain whether your company is insolvent or not.

A CVL begun by the directors, can be completed in a little over three weeks if information is readily to hand, that would form the statement of affairs to go to creditors. The creditors do need to be given two weeks notice of a meeting but otherwise matters can be completed quickly.

It may be that the directors do not want the company liquidated, and if that is the case, other solutions are on offer such as Company Voluntary Arrangements or Administrations. Both of these solutions envisage the same legal entity surviving whilst the liquidation process means that the limited company entity will close.

If you are a director reading this and other pages and you do not know which way to turn as there seems just too much information, you need to take professional advice as it can seem very daunting knowing what to do for the best.