As said earlier, not all liquidation is as a result of insolvency. You may have also borrowed personally to put money into the business, and if your on-going income is at risk this may lead to personal as well as corporate insolvency issues. You may find that options such as a Company Voluntary Arrangement CVA or Administration will provide a viable way for the company to carry on trading. What is Compulsory Liquidation? Your company may have outlived its purpose and be heading towards a natural end of trading, or you may wish to extract the value of cash and assets from the company in a tax efficient manner. Compulsory Liquidation is instigated by the Court, usually on the petition of a creditor or a shareholder. If there are any creditors they are then paid in order of priority. What are the Different Types of Liquidation? Any cash that remains is then distributed to preferred shareholders , if any, before common shareholders get a cut. The voluntary procedures, which are initiated by the shareholders and directors are explained in more detail below and the compulsory procedure, which is usually initiated by creditors like HMRC via a court order, is also covered. In that case the general meeting will appoint the liquidator s. Separate meetings of creditors and contributories may decide to nominate a person for the appointment of liquidator and possibly of supervisory liquidation committee. The conduct of the directors is reported back to the Secretary of State at the end of the liquidation proceedings and failure to cooperate with the Official Receiver can have serious repercussions. Directors may see voluntary liquidation as a welcome and safe exit from a stressful situation; whilst addressing all of the creditors, appropriately. Where this is not the case, the director becomes open to charges of wrongful or fraudulent trading. The company is struck-off the registrar of companies and this is known as dissolution, which is the final stage of the liquidation process. The shareholders appoint a liquidator who dissolves the company by collecting the assets of the solvent company, liquidating the assets, and distributing the proceeds to employees who are owed wages and to creditors in order of priority.
This procedure enables directors to write off unsecured limited company debts that are not personally guaranteed. This may give the business some breathing space and protection from further legal action taken by creditors. What are the Time-Frames for Compulsory liquidation? Do not ignore any threat in the form of a winding up petition, as the intention is to forcefully liquidate your company. Liquidation can also refer to the process of selling off inventory, usually at steep discounts. An Insolvency Practitioner is appointed as Liquidator. Although it should be seen as a last resort, liquidating a company via this route can be considered a rational decision and it may not necessarily mean the end of business. You can read more about who gets paid and in what order , including how employees are addressed. Surplus cash is distributed to the shareholders. A member of our corporate insolvency practitioner team will discuss your situation with you and offer you reliable advice with a view to minimising your liability as a company director. The unsecured creditors would be paid off with the cash from liquidation, and if any funds are left after settling all creditors, the shareholders will be paid according to the proportion of shares each holds with the insolvent company. The secured creditors would take over the assets that were pledged as collateral before the loan was approved. We deal with company debts of all types and can assist with business recovery, liquidations, receivership, etc. Bankruptcy is only relevant to an individual, partner, or sole trader and not a limited company. You may find that options such as a Company Voluntary Arrangement CVA or Administration will provide a viable way for the company to carry on trading. An individual may also decide to liquidate assets, such as house and land for cash. The court may dismiss the application if the petitioner unreasonably refrains from an alternative course of action. There are other courses of action that may be available to companies in financial difficulty, so consider exploring these before you decide to close the company via liquidation. There is no set time-frame to liquidate a limited company and with several variables dependent on each case, it is challenging to give an accurate time-frame without sufficient information. An asset that is not performing well in the markets may also be partially or fully liquidated to minimize or avoid losses. Compulsory Liquidation Compulsory liquidations are usually initiated by a creditor that is looking to force a company into closure via a court order application. Next in line are unsecured creditors. Free, Confidential Liquidation Advice For free confidential advice on liquidating a private company and help with your current situation, please contact us on and enquire about our services. Finally, shareholders receive any remaining assets, in the unlikely event that there are any. What are the Different Types of Liquidation? If there are any creditors they are then paid in order of priority.
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