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Insolvent Liquidation

There are 3 types of insolvent liquidation:

  • Creditors Voluntary Liquidation (CVL) – this is when the business is insolvent and the directors/shareholders voluntarily place the company into liquidation.
  • Compulsory liquidation (compulsory winding up) – this is usually where a person owed money takes steps to wind the company up.
  • Provisional liquidation – this is relatively rare but may be used to protect assets where there is concern that they may be misappropriated in the period needed to obtain a compulsory winding up order.

Process

For Voluntary liquidation the directors call meetings of shareholders  and creditors  to place the company into liquidation.  At these meetings a liquidator is appointed to look after the affairs of the company.  These meetings are usually set up with the help of an Insolvency Practitioner.

For compulsory or provisional liquidation, normally a creditor will make an application to court for the winding up of the company. This is often a lengthy process with court hearings, advertising etc.  Such a procedure is normally handled by a solicitor acting for the creditor.

closed mineUsually upon appointment of a liquidator the business will cease to trade and all employees made redundant. (See www.financialcrisis.co.uk/ee.html for more information as to the effect of Liquidation on employees and their entitlements to redundancy payments etc. or the booklet found on our download page.) 

How much will creditors get?

The liquidator will then seek to sell the assets of the company and will use this money to pay the costs of the liquidation and if there is anything left over pay it to creditors.

For CVLs and compulsory liquidation the payment to creditors would normally be significantly less than the amount owed and in many cases no payment is made.  However the return in a CVL is typically higher than for a compulsory liquidation.


Contact us if you require assistance in placing your business into liquidation  or require any advice as to the appropriate solution for your business 






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