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Guidance on Winding Up for Entrepreneurs
Guidance on Winding Up for Entrepreneurs

Winding up is complicated and there’s so much confusing information about it out there that we’ve created this guide to help you out.

Simon Potter avatar
Written by Simon Potter
Updated over a week ago

We here at Seedrs are your greatest cheerleaders, and we sincerely hope that your business uses the funds it raises through Seedrs to become a smashing success.   That said, there are inevitably some circumstances in which companies will have to liquidate (or “wind up”).  The world of winding up is complicated and there’s so much confusing information about it out there that we’ve created this guide to help you out.  It provides the basic information you need before winding up your UK company, and our top tips on how to engage with your Seedrs investors throughout what we know can be a difficult process.

Get In Touch With An  Insolvency Practitioner (“IP”)

Winding up can be complex, so we strongly encourage you to seek guidance from an IP as soon as you are thinking of winding up.  IPs can help you determine whether the company should wind up and which procedure would be most appropriate. We have a panel of IPs that we’ve worked with before that can help you:

Each of these advisors will be happy to have an initial consultation free of charge; however, they will charge fees if you choose to engage them further. 


If your company is insolvent (meaning it cannot repay its debts) and creditors are demanding repayment, you may enter administration.  The administration process provides your company with some “breathing space” to develop a plan to be rescued or start selling assets while your creditors are prevented from taking action to be repaid.  An IP will be appointed as the administrator to oversee the process.  Seedrs should receive the administrator’s initial proposal for what to do with the company as well as periodic progress reports as the administrator carries out its plan.   If the administration is unsuccessful it will be followed by a liquidation, but more commonly we see companies skip administration and go straight into liquidation.

Liquidation Generally

If the company’s purpose has come to an end, it will need to be liquidated.  Liquidation is the process by which the remaining assets of the company are sold and distributed to creditors to pay off any debts, in the order of priority set out by law. Generally, the priority of claims is:

  1. Costs of the winding up, including fees owed to the IP if needed;

  2. Creditors; and then

  3. Shareholders.

If your company is solvent when it liquidates, your Seedrs investors will likely receive a return.  After the  company is liquidated, it will cease all business, no longer employ people and be removed (“struck off”) from the companies register at Companies House. 

Types of Liquidation

The liquidation process that your company will use generally depends on its financial position and whether there are any disputes with creditors.  Below we’ve described the various ways a company can be liquidated, in order of most common for early-stage businesses:  

  1. Strike off. Directors sometimes choose to strike off a company without a formal liquidation procedure.  This method is commonly used by companies that have a relatively straightforward business affairs and can easily repay all of their debts and distribute any remaining assets. .  For more information on this approach, please visit

  2. Members’ voluntary liquidation (”MVL”). This approach is also used by solvent companies, but is typically for companies that have a more complex structure or are seeking certain tax benefits.   An MVL requires the directors to swear to a  declaration of solvency, and shareholder votes to approve the MVL and the appointment of an IP to manage the MVL.  Your Seedrs investors will usually see a return.   For more information on this approach, please visit

  3. Creditors’ voluntary liquidation (“CVL”). If the company cannot repay its debts, the primary route to liquidate is a CVL.  Unlike a MVL, in a CVL creditors are involved in the winding up process - you will need to seek approval from your creditors to appoint an IP and they will be entitled to progress reports throughout the process.  For more information on this approach, please visit

  4. Compulsory liquidation. This is a court-based winding up process that can be initiated by certain interested parties like creditors or directors.  This process is costly and time-consuming, and is typically used when there are disputes amongst the parties.  The judge has the discretion as to whether to issue a winding up order, and will consider the creditors’ wishes when making the decision.  For more information on this approach, please visit the website.

As a minority shareholder, Seedrs will be involved in the liquidation process to the extent that shareholder participation is required, which is typically limited to shareholder voting.  Otherwise, the process is handled by the company or the IP, as appropriate.  

Keeping Seedrs in the Loop

If you decide that the right thing for business  is to enter administration or wind it up, you should get Seedrs’ consent before getting started.  This is a requirement in the subscription and/or shareholder agreement that the business entered into with Seedrs.  All consent requests should be sent to

As you progress through the administration or liquidation process, you or your administrator should provide Seedrs with updates on its progress.  All updates, and other notices relating to the administration/liquidation, should be sent to or via post to:

Seedrs Limited
C/O: Portfolio Team
Churchill House
142-146 Old Street
London EC1V 9BW

Keeping Your Seedrs Investors Informed

Regardless of the liquidation process used, it is important that you keep your Seedrs investors updated  on developments as the liquidation progresses. Your investors have supported your business and will want to know what has happened and if they are likely to receive any returns when the company is wound up. They may have concerns about when they can claim loss or other tax reliefs.  They will likely understand if commercial and competitive forces have prevented it from growing as hoped,  but it is important to be transparent about what is happening.  In our experience, not providing investors with informative and regular updates will generate investor concern.

Notifying Investors.  Under the terms of your relationship with Seedrs, you are required to provide investors with regular updates as to the status of the business, and it’s particularly important you update your investors as soon as you can if the company is heading towards administration or winding up.  If the company is liquidating, in the first update to investors you should include the following information:

  • Why the company became insolvent;

  • What type of liquidation it is e.g. an MVL;

  • If the investors are likely to see a return; and 

  • Next steps.

Additional Updates.  You should also keep providing your investors with regular updates on the progress of the liquidation - touching base, even just to let them know that not much has happened, reassures investors.  If you haven’t provided your investors with an update recently, we will remind you to do one.

How Can Seedrs Help

Please get in touch with us at if you would like more information or if we can help you in any other way.  

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