Liquidation
There are two types, Voluntary Liquidation, where the shareholders resolve to wind up the company and Compulsory Liquidation, where a winding up order is made by the court.
Voluntary Liquidation
Voluntary Liquidation can be subdivided into Members' Voluntary Liquidation, where the company is solvent and Creditors' Voluntary Liquidation where the company is insolvent.
Members' Voluntary Liquidation
The directors of the company swear a declaration of solvency and by way of a Special Resolution the shareholders of the company resolve to place the company into liquidation and appoint a liquidator The declaration of solvency must state that the directors of the company have conducted a full enquiry of the company's affairs and have formed the opinion that it will be able to pay its debts with interest at the official rate within a period not exceeding 12 months. The special resolution to place the company into liquidation requires the approval of 75% of shareholders' votes. If the assets realise insufficient to pay creditors in full then the liquidation is converted into a creditors voluntary liquidation.
Creditors' Voluntary Liquidation
The shareholders resolve to wind up the company by extraordinary 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.
Compulsory Liquidation
A company will be wound up by the courts following a petition issued by one of the following:
- The company
- The directors
- A creditor
- A shareholder
- An Administrator or Administrative Receiver
A winding up order can be made on a number of grounds but the principal ones are as follows:
- The Company is unable to pay its debts as and when they fall due
- It is just and equitable (common in the event of shareholder disputes)
Once a winding up order is made the affairs of the company are dealt with by the local Official Receiver's office who may call shareholders' and creditors' meetings at which a Liquidator may be appointed.
In some instances where a petition is issued a Provisional Liquidator is appointed to safeguard the assets of the company.
The Liquidator in a compulsory liquidation deals principally with the realisation of assets and the agreement of creditors claims whilst the Official Receiver investigates the company's affairs.
Call us on 0800 195 4585 to see if we can be of any assistance with liquidation matters.