When a company is not able to pay its debts when they fall due, or its liabilities outweigh its assets, it can be placed into business liquidation, which involves selling the company’s assets for the benefit of repaying creditors. The process can be started on a voluntary basis by a company (directors and shareholders) or through a court order by another party. If you are considering business liquidation or have had a winding-up petition served against you, this article will provide details about what occurs during the process.
The liquidation process involves the appointment of a liquidator to settle the affairs of a company. Liquidation can be instigated voluntarily by a company’s directors. This usually occurs when action by creditors is likely, but the directors (with the shareholders’ agreement) prefer to wind up a company before the creditors do. There are two types of Voluntary liquidation: Creditor’s Voluntary Liquidation (CVL) and Member’s Voluntary Liquidation (MVL). If you are considering voluntary liquidation, this article will outline the differences between the two types.