Liquidating a one-director company

The CVL procedure under Insolvency Act 1986 Part IV applies to all companies regardless of director count. Required steps are unchanged:

• ›Board resolution to recommend winding-up.
• ›Members’ special resolution to wind up — 75% by value of voting shareholders.
• ›Creditors’ decision procedure to confirm liquidator appointment (s.100 IA 1986; deemed consent or virtual meeting).
• ›Statement of Affairs preparation (s.99 IA 1986).
• ›All standard CVL procedural requirements thereafter.

What differs is the practical execution. With one director and (typically) one or few shareholders, decisions can be taken quickly and resolutions passed without meeting formalities using the written-resolution provisions in Companies Act 2006.

The board resolution remains required even with one director. The director signs the board minute themselves, recording:

• ›The director’s belief that the company is insolvent (cashflow and/or balance sheet basis — s.123 IA 1986).
• ›The decision to recommend voluntary winding-up to shareholders.
• ›Approval to convene the members’ special resolution and creditors’ decision procedure.
• ›Appointment of the proposed Licensed Insolvency Practitioner as nominee.

Practical format — a written board minute signed by the director on date X, with the members’ special resolution dated the same day or shortly after.

If the director also holds all the shares (the most common sole-director setup), the members’ special resolution can be passed by:

• ›Written resolution under Companies Act 2006 ss.288–300 — no meeting required; signed by the sole member.
• ›Single-member general meeting — the sole member ‘meets’ alone; some practitioners prefer this for procedural clarity.

Where multiple shareholders exist (rarer for sole-director companies but happens — family shareholders, founder + investor), the standard 75% threshold applies. Resolution by written resolution is typical unless the shareholders are dispersed and resistant to coordinate.

The Statement of Affairs (SoA) is sworn or affirmed by the directors. With one director, that director signs alone. The director declares under section 99 IA 1986 that the SoA gives a true picture of the company’s position.

• ›No second director to check the figures — the sole director carries full responsibility for accuracy.
• ›Working with the IP and accountant before signature is essential — particularly on asset valuations, creditor schedules, contingent liabilities.
• ›False declaration under s.99 is a criminal offence — the same standard applies whether one director signs or several.
• ›DLA position — in sole-director / sole-shareholder companies, the DLA is often the most material item on the SoA.

In sole-director / sole-shareholder companies, director loan accounts are typically large and central to the insolvency. Two common patterns:

• ›Director owes company (overdrawn DLA) — the most common pattern. Treated as a company asset on the SoA; the liquidator pursues the director personally for repayment. Section 455 CTA 2010 tax may also apply.
• ›Company owes director (DLA in credit) — the director is an unsecured creditor for the balance, ranking pari passu with other unsecured creditors. Recovery typically limited.

The DLA position drives the director’s personal exposure. An overdrawn DLA of £50,000+ means the liquidator will likely pursue the director — either for repayment in full or for negotiated settlement at less than full value. See DLA and section 455.

Sole directors who are also employees of their own company can typically claim statutory redundancy from the Redundancy Payments Service (RPS) when the company enters CVL. The mechanics are the same as for multi-director companies. See Director redundancy claim for the full framework.

For sole directors, the redundancy claim often funds the CVL fee directly — the RPS payment frequently exceeds the simple CVL fee and provides the working capital to engage the procedure. See Liquidating with no money.

Sole-director / sole-shareholder companies inherently have conflicts of interest. The director is making the wind-up decision, signing the SoA, dealing with the liquidator, and is also the party whose conduct will be reviewed under section 218 IA 1986. Practical management:

• ›Take advice from an IP early — the IP is independent of the director and can identify exposure points.
• ›Document decision-making contemporaneously — particularly around DLA repayment, asset transfers, and dividend declarations.
• ›Don’t try to favour the director / DLA in the period before insolvency — this is preference (s.239 IA 1986) and misfeasance (s.212). The liquidator will identify it.
• ›Cooperate fully with the section 218 investigation — sole directors are most exposed if they appear evasive.

• ›MVL vs CVL — if the company is solvent (debtors collected, no creditors), MVL is usually the better route for BADR-eligible distribution. CVL only where insolvent.
• ›IR35 / off-payroll — if HMRC enquiry on IR35 status is the precipitating event, specialist advice on the dispute is essential before CVL. The liquidator inherits any unresolved HMRC determination.
• ›Dormant company close-down — contractor companies that have stopped trading but have no creditors may suit dormant strike-off. See the dormant article below.

For the broader CVL framework, see CVL pillar. For director-employee redundancy, see Director redundancy claim. For DLA position, see DLA and section 455. For the MVL alternative for solvent contractor companies, see MVL vs strike-off.