Guidance

Liquidation and insolvency: companies registered in Scotland

Updated 10 March 2022

Applies to Scotland

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This guidance provides a basic overview of insolvency proceedings and more detailed information about the documents you must send to Companies House under:

It summarises some of the rules that apply to:

  • moratoria
  • company voluntary arrangements
  • administrations
  • receivers
  • voluntary liquidations
  • compulsory liquidations

Due to the complexity of the requirements, this guide will not be able to tell you everything you need to know about insolvent companies.

You should seek independent professional advice if you suspect your company is, or is about to become insolvent. You should also contact the Insolvency Service.

We can help with queries about what documents you must send to Companies House, such as what notice to file when an administrator has been appointed.

You can find the relevant legislation in the:

1. Insolvency proceedings

Insolvency proceedings are formal measures taken to deal with company debt.

There are many different types of company insolvency proceedings. We cover all of them in this guidance.

It’s important to note that not all companies involved in insolvency proceedings are insolvent.

1.1 Companies can be dissolved without going through insolvency proceedings

If we have reason to believe that a company is not carrying on business or is not in operation, its name may be struck off the register and dissolved without going through liquidation. A private company that is not trading can apply to be struck off the Companies House register. This procedure is not an alternative to formal insolvency proceedings.

See our guidance for more information on strike off, dissolution and restoration.

1.2  Supervising insolvency procedures

All liquidators, administrators, administrative receivers and supervisors taking office must be authorised insolvency practitioners.

Receiver managers, Law of Property Act (LPA) receivers and nominees appointed to manage a company voluntary arrangement moratorium do not have to be authorised.

Insolvency practitioners may be authorised by the:

  • Association of Chartered Certified Accountants
  • Insolvency Practitioners’ Association
  • Institute of Chartered Accountants of England and Wales
  • Institute of Chartered Accountants in Ireland
  • Institute of Chartered Accountants in Scotland

1.3  Directors of an insolvent company

The liquidator, administrative receiver or administrator must send a report to the Secretary of State of Business, Energy & Industrial Strategy, on the conduct of all directors who were in office in the last 3 years of the company’s trading. The Secretary of State must decide whether it’s in the public interest to seek a disqualification order against a director.

Examples of the most commonly reported conduct are:

  • continuing the company’s trading when the company was insolvent
  • failing to keep proper accounting records
  • failing to send in returns or pay any tax that is due
  • disqualification for persistent breaches of companies legislation
  • disqualification of unfit directors of insolvent companies
  • disqualification following investigation of companies
  • disqualification for wrongful trading

2.  Moratorium

A moratorium provides struggling businesses a formal breathing space. It prevents the company’s creditors from proceeding against the company during this time. During a moratorium no legal action can be taken against a company without leave of the court.

2.1 Obtaining a moratorium

The directors must apply to the court for a moratorium. The moratorium will normally last for a period of 28 days and will be managed by a nominee, who may (or may not) be a registered insolvency practitioner.

2.2  What we need

The nominee must deliver a notice of the moratorium to Companies House. You must notify us if the moratorium ends, or is:

  • extended

  • further extended

  • renewed

  • being continued

The Insolvency (Scotland) (CVA and Administration) Rules came into force on 6 April 2019. This introduced new statutory forms that you must file with us.

At the end of a moratorium a company may (or may not) proceed to a CVA.

Access the full list of forms for moratorium.

3. Company voluntary arrangements (CVA)

A CVA is when a company proposes an agreement with its creditors. This arrangement must be approved by the court, in which the company has formally agreed terms with its creditors for the settlement of its debts.

3.1  Proposing a CVA

A CVA may be proposed by:

  • the administrator, where the company is in administration
  • the liquidator, where the company is being wound up
  • the directors, in other circumstances

3.2  Considering the proposal

Where the nominee is not the administrator or liquidator, they must deliver notice of consent to the proposer as soon as possible after receiving the proposal. Within 28 days of receipt the nominee must submit a report to the court.

3.3  Approving a proposal for a CVA

The nominee must invite members of the company to consider a proposal by summoning a meeting and inviting creditors to consider the proposal by a decision procedure.

3.4 Once the CVA is approved

If the members and creditors approve the arrangement, the nominee or his replacement becomes the supervisor of the arrangement.

3.5 What we need

The supervisor must send a copy of the chair’s report of the meeting.

The supervisor must send reports on the progress and prospects for the full implementation of the voluntary arrangement to all interested parties including Companies House every 12 months starting with the date the CVA was approved.

Access the full list of forms for CVAs.

3.6  Termination or full implementation

When the arrangement is completed, the supervisor must send a copy of the notice to creditors and the supervisor’s report to us within 28 days after final completion or termination of the voluntary arrangement.

If the arrangement is suspended or revoked, you must notify us.

4. Administration

Administration provides breathing space to allow a rescue package or more advantageous realisation of assets to be put in place. An administrator is appointed to manage a company’s affairs, business and property for the benefit of the creditors.

The person appointed must be an insolvency practitioner and have the status of an officer of the court, whether they’re appointed by the court, or not.

The objective of administration is to:

  • rescue a company as a going concern
  • achieve a better price for the company’s assets or otherwise realise their value more favourably for the creditors as a whole than would be likely if the company were wound up (without first being in administration)
  • in certain circumstances, realise the value of property in order to make a distribution to one or more preferential creditors

Access the full list of forms for companies in administration.

4.1  Companies entering administration

A company enters administration when the appointment of an administrator takes effect. An administrator may be appointed by:

  • an administration order made by the court
  • the holder of a floating charge
  • the company or its directors
  • the liquidator of a company
  • the supervisor of a CVA
  • a designated office of a magistrate’s court

The administrator must perform their functions as quickly and efficiently as reasonably practicable in the best interests of the creditors as a whole.

4.2  Notification when a company is in administration

As soon as reasonably practicable, an administrator must send a notice of their appointment to the company and each of its creditors and publish notice of their appointment.

The administrator must also send a notice of their appointment to us.

4.3  The process of administration

Soon after their appointment, the administrator will request a statement of the company’s affairs from relevant people - such as an officer or employee of the company.

As soon as reasonably practicable and before the end of 8 weeks after the company enters administration, the administrator must make a statement setting out proposals for achieving the purpose of the administration or explaining why they cannot be achieved. The proposals may include a voluntary arrangement or a compromise or arrangement with creditors or members.

You must send the statement setting out the proposals to:

  • The Registrar of Companies for Scotland
  • every creditor of the company whose claim and address he is aware
  • every member of the company whose address he is aware

Creditors will be asked to approve (with or without modifications) the statement of proposals. Following the initial meeting the administrator may form a creditors committee. The administrator must notify creditors of any revisions to the proposals.

Any decisions taken by creditors must be reported to us.

Role of the administrator in the disposal of assets

An administrator must not make a substantial disposal to a connected person within the first 8 weeks of administration unless they either:

  • obtain approval of the transaction from creditors
  • have received and considered a report obtained by the connected person from an evaluator on the reasonableness of the proposed disposal

The administrator must send a copy of the report to the creditors and Companies House at the same time as they send the administrator’s proposals.

If the report, or any previous reports, concluded that the disposal is not reasonable in the circumstances, the administrator must also send a statement explaining their reasons for carrying on with the disposal.

You must send a copy of the report, and if necessary, the statement, to Companies House, together with the administrator’s proposals.

Read more about the disposal of assets in administration.

4.4  Approval of statement of proposals

The administrator will be able to use a process of deemed consent where they write to the creditors with a proposal. If they do not receive objections from 10% or more of creditors, the proposal will be deemed to be approved. If 10% or more creditors object, the office holder will use an alternative decision-making process, such as a virtual meeting.

Where the proposal is deemed to have been approved the administrator must, as soon as reasonably practicable, deliver a notice of the date of deemed approval to us.

4.5  When administration ends

There are several ways administration can end.

Administration can end automatically one year from the date the administration took effect. You must notify us. But the administration can be extended with the consent of the creditors or the court.

You must notify us of any extension.

An administrator who thinks that the purpose of administration has been sufficiently achieved must file a notice with the court and Companies House.

An administrator appointed by a court order may apply to the court to end administration if they think that the purpose of the administration cannot be achieved or the company should not have entered administration, or a creditors’ decision requires them to make the application. The court will discharge the administration order and the administrator must notify us.

An administrator appointed by the holders of a floating charge or by the company or its directors may end administration when the purpose of administration has been sufficiently achieved. The administrator must file notice with the court and Companies House.

Administration may end on the application of a creditor to the court. If the application is approved the administrator must send a copy of the order with the relevant form to us.

Administration may end and move into dissolution. This can happen if the administrator thinks that a company has no property with which to make a distribution to its creditors. The administrator must send notice of this to us and the company will be dissolved 3 months after the date the form is registered unless an order is made to:

  • extend or suspend the period
  • stop the dissolution

You must send us notice of any order.

4.6 Administration can be converted to creditors voluntary liquidation (CVL)

The administration can be converted to CVL where the administrator of a company thinks the total amount each secured creditor of the company is likely to receive has been paid or set aside for him. Also, that a distribution will be made to any unsecured creditors of the company.

The administrator must send form AM22 (Notice of move from administration to creditors’ voluntary liquidation) to Companies House. The company converts from administration to CVL on the date of registration of form AM22.

Once we register the form, you must also file form 600 (Notice of appointment of liquidator). The appointment of the liquidator must not be before the date the company went into liquidation – the date of registration of the AM22.

5. Receiver

There are different kinds of receiver and their powers vary according to the terms of their appointment.

An administrative receiver is a receiver or manager of the whole, or substantially the whole, of a company’s property who is appointed by or on behalf of the holders of any debentures of the company secured by a floating charge. They have the power to sell (or otherwise realise) the assets covered by the floating charge and apply the proceeds to the debt owed to the charge holder.

Receivers who are not administrative receivers may be appointed in other circumstances. For example, under powers contained in an instrument or document creating a charge over a company’s property, a receiver or manager may be appointed until the debt is recovered. Receivers may also be appointed under the Law of Property Act 1925.

Access the full list of forms for receivership.

5.1 Notice of the receiver’s appointment

Within 7 days of the appointment, the person who appoints the receiver must deliver notice to the Registrar of Companies for Scotland and the Accountant in Bankruptcy (AIB). You must file Form RM01(Scot) for each separate charge registered with Companies House over which the receiver is appointed, whether the appointment is over part of the property, or all the company’s assets.

When the administrative receiver, receiver or manager ceases to act, the holder of the floating charge must deliver notice to us and AIB within 14 days.

5.2  What the receiver sends to Companies House

Within 3 months of appointment, an administrative receiver must make a report to:

  • Companies House
  • the company’s creditors, including unsecured creditors
  • the holders of a floating charge
  • any trustees for secured creditors of the company

The report must explain the circumstances of the appointment and the action the administrative receiver is taking. The report must also include a summary of any ‘statement of affairs’ prepared for the receiver by the officers or employees of the company.

Statement of affairs

This is a summary of the company’s assets, liabilities and creditors. The administrative receiver decides whether it’s required and who should prepare it.

6.  Voluntary liquidation

There are 2 kinds of voluntary liquidation:

  • members’ voluntary liquidation (MVL) - which means the directors have made a statutory declaration of solvency
  • creditors’ voluntary liquidation (CVL) - which means that the directors have not made such a declaration

Access the full list of forms for voluntary liquidation.

6.1 When a company can go into MVL

A company can go into MVL when the directors of a company believe the company is solvent.

6.2  The statutory declaration

The statutory declaration will state that the directors have made a full inquiry into the company’s affairs and that, having done so, they believe the company will be able to pay its debts, in full, within 12 months from the start of the winding-up.

The declaration will include a statement of the company’s assets and liabilities as at the latest practicable date before making the declaration.

6.3  The start of liquidation

The liquidation starts when the members, in general meeting, pass a special resolution to wind up the company voluntarily.

6.4 Giving notice of voluntary liquidation

Notice of the special resolution for voluntary winding-up of the company must be published in the Edinburgh Gazette within 14 days of the passing of the resolution. The company must also send a copy of the special resolution to us and the AIB within 15 days of the general meeting.

6.5  When a CVL is appropriate

A company may go into CVL when it cannot pay its debts.

6.6 What the company must do

The company must pass a special resolution to say that it cannot continue in business because of its liabilities and that it’s advisable to wind up.

The resolution must be:

  • advertised in the Edinburgh Gazette within 14 days
  • sent to the Registrar of Companies for Scotland and AIB within 15 days

A meeting of creditors must be held in the next 14 days after passing the resolution. Notice of the meeting must be sent to the creditors at least 7 days before the meeting. The directors must also prepare a statement of affairs for consideration at the meeting and appoint one of the directors to attend and preside over the meeting.

When the liquidator is appointed, the directors must provide them with a statement of affairs and otherwise co-operate with the liquidator.

6.7 Advertising the meeting

The meeting must be advertised in the Gazette. Additional advertising does not have to be by newspaper advertisement only. You can use other forms of media advertising if you think it’s more appropriate. This is at the discretion of the office holder.

6.8  The main duties of a liquidator

The liquidator is appointed to wind up the company’s affairs. The liquidator does this by calling in all the company’s assets and distributing them to its creditors.

6.9 Notification of their appointment

Within 14 days of being appointed, a liquidator must publish a notice of appointment in the Edinburgh Gazette and notify the AIB.

6.10  Converting a MVL into a CVL

If the liquidator decides that the company will not be able to pay its debts in full in the period stated in the directors’ statutory declaration of solvency, they must call a meeting of the creditors which must be held within 28 days. The liquidation becomes a CVL from the date of the meeting.

6.11 Requirements for giving notice

The liquidator must:

  • post a notice of the meeting to each creditor at least 7 days before the date of the meeting
  • advertise the date of the meeting in the Edinburgh Gazette and in 2 newspapers in the area where the company has its principal place of business
  • prepare a statement of affairs for consideration at the meeting - a copy of the statement must be sent to the AIB within 7 days of the meeting

6.12  What happens when the company’s affairs are fully wound up

The liquidator presents an account to final meetings of creditors and members of the company. They must advertise the meetings in the Edinburgh Gazette at least one month before.

Within one week of the meeting having taken place, the liquidator must send the account to us and AIB together with a return of the final meeting.

Unless the court makes an order deferring the dissolution of the company, it’s dissolved 3 months after the return and account are registered with us.

7.  Compulsory liquidation

Compulsory liquidation of a company is when the company is ordered by a court to be wound up.

Access the full list of forms for compulsory liquidation.

7.1  Courts can order a compulsory liquidation

The Court of Session, or Sheriff Court with the appropriate jurisdiction, may order the winding-up of a company. This may be, for example, on the petition of a creditor or creditors on the grounds that the company cannot pay its debts.

A company is regarded as not able to pay its debts if, for example, a creditor:

  • is owed more than £750
  • presents a written demand in the prescribed form (known as a statutory demand to the company
  • the company fails to pay, secure or agree a settlement of the debt to the creditor’s reasonable satisfaction

There are other situations where a company is deemed not able to pay its debts.

The court may also order the company to be wound up on the petition of:

  • the company itself
  • the company’s directors or one or more members
  • the Secretary of State for Business, Innovation and Skills
  • the Financial Conduct Authority

7.2  Information on the public record

If the petition is successful, the company must send a WU01(Scot) form and a copy of the winding-up order to us and AIB and it will be placed on the company’s public record.

The petition itself is not presented to us and will not appear on the public record.

Unless the court directs other arrangements, the petition must be advertised in the Edinburgh Gazette.

7.3  The appointment of the liquidator when an order is made to wind up the company

A provisional liquidator may be appointed after the petition is presented. If a winding up order is made, an interim liquidator is appointed. Both the provisional and interim liquidator must notify us and AIB of their appointments.

7.4 The duties of the interim liquidator

Within 28 days of the appointment, the interim liquidator investigates the company’s affairs and will call meetings of creditors and contributories. Contributaries are people that are liable to contribute to the assets of a company in the event of it being wound up.

The meetings appoint the official liquidator who must notify AIB within 7 days. If no liquidator is appointed at the meetings, the court appoints a liquidator.

The liquidator must send to AIB a statement of receipts and payments for the first 12 months of liquidation and thereafter every 6 months until the winding up is complete.

7.5  When the winding-up is complete

When we, together with the AIB, receive notice from the liquidator of the final meeting that winding-up is complete, we will register it and publish its receipt in the Edinburgh Gazette.

Unless the Court directs otherwise, the company will be dissolved 3 months after the notice was registered with us.

8. UK Societas

Insolvency proceedings that apply to a PLC also apply to a UK Societas.

See our guidance on UK Societas.

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