SubscribeThere are 3 main types of liquidation:
- Compulsory Winding up - this is where a creditor takes action against the business and applies to court for it to be wound up. A Compulsory Winding up will be initially handled by the Official Receiver and may later be handed to a Licensed Insolvency Practitioner to deal with.
- Creditors Voluntary Liquidation - this is where, due to the company’s insolvency, the directors have decided to place it into liquidation.
- Members Voluntary Liquidation - this is the liquidation of a solvent business and is used to bring a company to the end because it has fulfilled its purpose or is no longer required.
This article looks at the most common form of liquidation - creditors voluntary liquidation.
Arranging a meeting of creditors and shareholders
Once the decision has been taken the business will usually be closed immediately and effectively mothballed pending the appointment of a liquidator. A notice of meeting will be sent out to all creditors, employees and shareholders of the business for a date usually around 18 days after sending the notice.
Appointment of a liquidator
At the meeting of shareholders a resolution is proposed to appoint a liquidator. Once this resolution has been passed the company is in liquidation but the liquidator has limited powers.
A meeting of creditors is usually held shortly after the shareholder meeting where the creditors are presented with a report on the reasons for the liquidation. The creditors then vote as to whether they are happy with the liquidator chosen by the shareholders or wish to appoint their own. At this meeting creditors have the opportunity to ask questions of the directors.
Following liquidation
Once the company is in liquidation the liquidator will undertake the following tasks:
- Sell any remaining assets and collect any debts
- Deal with any claims over the assets of the business - e.g. reservation of title claims
- Investigate the affairs of the company and report on the conduct of the directors
- Agree the claims from creditors as to how much is owed
- Distribute any funds from realising the assets to the company’s creditors
- Close the liquidation and place the company into dissolution
The whole liquidation process can take from 6 months to many years depending upon the complexity of the case and the issues to be addressed. Further details of the liquidation process can be found at www.liquidationhelp.co.uk.
Totality Solutions Limited is a firm of Chartered Accountants and Insolvency specialists. Totality Solutions prides itself on providing accurate, independent and commercial advice to its clients and is committed to providing a first class service.
For more information about the services offered by Totality Solutions Limited or for a free confidential consultation contact us on 0870 495 7854 or visit our website http://www.totalitysolutions.com
J_Shaw
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