How the Liquidation Process Works

The liquidation process may vary depending on the type of liquidation procedure that the company is undertaking. If a company is liquidating voluntarily, then it will either undertake a Members Voluntary Liquidation (MVL) or a Creditors Voluntary Liquidation (CVL). If a company is given a winding up order by a court, then it is liquidated compulsorily.

A Members voluntary liquidation process will consist of the company directors deciding to liquidate the company with the approval of shareholders. Companies entering this type of liquidation are usually solvent. The process will involve the company declaring that it is solvent and that the debts will be able to be paid off within twelve months. Companies who fail to state that they are solvent or wrongfully declare themselves solvent may face penalties. An insolvency practitioner will be required to liquidate the company.

If a company is insolvent, then it may enter a Creditors Voluntary Liquidation (CVL). This process often takes longer and includes more involvement from creditors. A liquidator will thoroughly investigate the company, value and sell the assets and ensure that the creditors are paid. Regular meetings with the creditors are held during the procedure.

The compulsory liquidation process involves a creditor petitioning to the court. Company directors can also petition for a winding up order, but this can only be done by a group of directors and not a single one. The company will receive a winding up order in court and the liquidation process will be brought to an end. This type of liquidation can be stressful, but may be a relief for those who wish to move on from the company.

In order for the liquidation process to run smoothly, the company's liquidator must be qualified. If a company feels that the process has not been dealt with correctly or that the appointed insolvency practitioner was not qualified, then they can file a complaint.

In order for the liquidation process to run smoothly, the company's liquidator must be qualified. If a company feels that the process has not been dealt with correctly or that the appointed insolvency practitioner was not qualified, then they can file a complaint.