This is a process which brings about the end of a company’s life. All assets are sold and the funds are distributed to all classes of creditor in order of priority. In some cases there will be no return to unsecured creditors.

In the real world it is normal for directors who are experiencing cash flow difficulties to firstly call on their accountants for help and guidance. The accountant will then refer his client on to a licensed insolvency practitioner and the practitioner will take a birds-eye view of the business and advise the directors which route they ought to take. In the case of Compulsory Liquidation (CL), a director or creditor will petition for the winding up of the company.

If the only option open to the company is liquidation (CVL), then the process commences with the shareholders of the company passing a resolution to place the company in to liquidation and to appoint a liquidator who must be a licensed insolvency practitioner. A meeting of the company’s creditors is called and the insolvency practitioner is either confirmed in office, or the creditors may appoint an alternative practitioner (need more than 50% of votes to do this).

If a creditor petitions for the winding up of a company (CL) then subject to the granting of the petition, the Official Receiver will become the liquidator. A creditors meeting may be called if the company has assets, and as in a CVL, creditors who represent more than 50% of the total creditors, may vote to appoint another liquidator.

With Members Voluntary Liquidations, all debts are paid in full, plus statutory interest, within twelve months of the declaration of solvency.

For more detailed information on the different types of liquidation, please go to our brochure series or download our brochure entitled Liquidation.