CBA Insolvency Practitioners

Company Liquidation

The term “liquidation” is confusing to most and yet it is perhaps the most widely used process in the UK corporate market today. To liquidate a company is to formally wind up its business affairs where the assets and liabilities belong to the company as opposed to any individual shareholder or director. We outline below the three main categories of liquidation.

Members Voluntary Liquidation

A members’ voluntary liquidation is initiated by the shareholders of a company which can pay its agreed debts, plus statutory interest, in full within twelve months.

Winding up a company in this way may be entered into for a variety of reasons, particularly if the company no longer has any useful purpose and has surplus assets which must be distributed to the creditors and then to the shareholders of the company.

Creditors Voluntary Liquidation

In spite of the title, it is the directors of the company who take the decision to cease trading and seek the advice of an insolvency practitioner.

By taking advice at an early stage directors can explore alternative solutions but once they have concluded that the company cannot meet its debts and therefore must cease trading the company is placed into liquidation.

It is generally accepted that when a company’s liabilities exceed its assets or it fails to pay its debts, when due, or there is no viable market for the company’s products then liquidation is the only exit route. However closure also brings new beginnings and the fact that the directors have placed the company into liquidation does not prevent them from starting up a new company.

Compulsory Liquidation

In this case the procedure commences with a petition to the courts to wind up the company. The most common forms of petition are initiated by the directors of the company, the shareholders of the company or a creditor of the company.

In the initial stages an officer of the court (The Official Receiver) is appointed. Upon the granting of the order by the court the Official Receiver takes up office. Creditors must be notified of this fact within 12 weeks and must also be told whether the Official Receiver deems it necessary to call a meeting of the company’s creditors.

It is usual that a creditors’ meeting is called if the company has assets requiring disposal, at which point creditors may nominate an outside practitioner to act as liquidator.

Tailored Advice

For specific advice relevant to your circumstances contact us for a free consultation, without obligation.