Creditors Voluntary Liquidation
What
is it?
There are two types of liquidation 'Members Voluntary Liquidation', where the shareholders resolve to wind up the company and 'Creditors Voluntary Liquidation'.
Creditors' Voluntary Liquidation is a process by which the directors of a company hold a meeting with the shareholders and creditors to place the company into insolvent liquidation. An insolvency practitioner is used for this process.
Who is it for?
- Companies which are no longer viable
- Companies
which cannot pay their creditors
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The Process
The shareholders resolve to wind up the company by ordinary resolution. The creditors also meet to receive an explanation from the directors of the company for its failure and to ratify or otherwise the appointment of the Liquidator appointed by the shareholders. It is the Liquidator's duty to realise the assets, investigate the company's affairs, report on the directors' conduct and distribute funds available in the relevant priority.
Advantages
- Insolvency practitioner takes control of company finances, therefore ceasing potentially poor trading practices
- The affairs of the company are dealt with formally, any contingent liabilities in respect of warranties etc. which may subsequently crystallise will form a claim in the liquidation
- The directors will no longer have any responsibilities for the management of the company, although they are obliged to provide such information and attend on the liquidator as required, and may face claims by the liquidator in respect of their past management of the company
Disadvantages
- The conduct of the directors may be investigated by the liquidator
- Sometimes slow to initiate
- It is more difficult to continue trading than with other options
- The company assets are usually heavily discounted
- The liquidation will be advertised in two local papers and therefore may be brought to the attention of various people as well as your creditors. In addition, this will result in increased costs
Other Options available
Members Voluntary Liquidation (MVL), Informal Creditor Agreement, Administration
Call us on 0800 195 4585 to see if we can be of any assistance regarding 'Creditors Voluntary Liquidation'.
