Company Liquidation

A company liquidation involves taking the company assets and disposing of them to create the maximum financial value for distribution among creditors according to their legal priority and entitlement.

Typically, the preferential and secured creditors of the business will be paid something but unsecured creditors will receive nothing during this process.

The liquidation process may occur following a receivership or administration. However, the directors or shareholders may recommend that circumstances require that the company be placed directly into liquidation via either:

  • a Creditors Voluntary Liquidation (CVL);
  • or a Members Voluntary Liquidation (MVL);
  • or a Court can issue a winding up order for a compulsory liquidation on receiving a petition from a creditor.

For an insolvent business there are two options for liquidation:

  • A creditor's voluntary liquidation, the directors pass a resolution to wind the company up. A creditors meeting is held to nominate the appointment of a liquidator and consider a statement of affairs.
  • In a compulsory liquidation, creditor's petition to the court for the business to be wound up.

Once a company has been put into liquidation, the Insolvency Practitioner has a duty to report to the Insolvency Service on the conduct of any director of an insolvent company who has been a director within 3 years from the date of insolvency.

In the event that the conduct of the director(s) is found to be unsatisfactory they could be prosecuted and disqualified.

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