Liquidation

Liquidation is the process by which the assets of a company are realized, and the proceeds redistributed.

Liquidation is often thought of as being synonymous with company insolvency. However, liquidation is just one of the final stages in closing down a company, and companies that are liquidated can be financially sound with no unpaid creditors.

When a company is in financial trouble, an insolvency practitioner can be appointed to handle the situation. In some cases, liquidation will not be the preferred action and insolvency practitioners can use their statutory powers to help the business recover. Sometimes the directors of a healthy business will decide to liquidate their company.

Liquidation can be either compulsory or voluntary:

 

Compulsory Liquidation

Compulsory liquidation usually follows a winding up petition being filed at court and the court issuing a winding up order. A winding up petition can be filed by the company itself, or one of the company’s creditors, or by an official receiver following the instruction of the courts.

 

Voluntary Liquidation

Voluntary liquidation follows when the directors of a company make the decision themselves to voluntarily wind up the company. This can happen with a solvent company as well as an insolvent company. If the company is solvent, the liquidation will be a members' voluntary liquidation (MVL). If the company is insolvent the liquidation will be a creditors’ voluntary liquidation (CVL).

The liquidator’s primary responsibility is to look after the interests of creditors. The liquidator will sell company assets to achieve the best price and distribute the proceeds to creditors. In the liquidation of solvent companies, the amount remaining after all creditors are paid can be distributed to the shareholders of the company.

Liquidation can be the one of the final stages in administration, creditors' voluntary liquidation, winding up, members’ voluntary liquidation, receivership, and company voluntary arrangements. Each of these is a different process, and not all liquidations are the result of failed companies.

 

Liquidation v Receivership

Liquidation and receivership are often confused. The key difference is as follows:

Liquidation involves selling the assets of a company and distributing the proceeds to creditors, and after all creditors have been paid, to the company’s shareholders.

Receivership is the process when a creditor has a specific type of secured loan which includes a contractual right to appoint a receiver to recover amounts owed.

 

Liquidation Notices

The following is a list of Notices that can be published confirming the appointment of a liquidator:

2443 Appointment of Liquidators (Notice 2443 under Creditors' Voluntary Liquidation). This provides details of the date of appointment, name and address, and contact details of the liquidators in a creditors' voluntary winding-up.

2432 Appointment of Liquidators (Notice 2432 under Members’ Voluntary Winding Up). Placed by the liquidator this notice provides details of the date of appointment, name and address, and contact details of the liquidators.

2454 Appointment of Liquidators (Notice 2454 under Liquidation by the Court). Placed by the liquidator giving notice of the date of appointment, name and address and contact details for the liquidators

 

See also corporate insolvency:

Administration

Creditors' Voluntary Liquidation (CVL)

Winding Up Petitions and Winding Up Orders

Members’ Voluntary Liquidation (MVL)

Receivership

Company Voluntary Arrangement (CVA)

Liquidation

Company Insolvency Procedures

Warning Signs of Insolvency

 

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