Liquidation

Liquidation is a legal process whereby a limited company is 'wound-up' and eventually it is dissolved, which means it ceases to exist.

There are three types of liquidation :

1. Members' voluntary liquidation: The shareholders of a company decide to go into liquidation, and there are sufficient assets to pay all the debts of the company, i.e. the company is solvent. This is often used when the shareholders decide to move onto different projects or retire. Despite the fact that the company is not insolvent, an insolvency practitioner must be appointed as liquidator to oversee the process.

2. Creditors' voluntary liquidation: This is where the shareholders or directors of a company decide to go into liquidation, but there are not enough assets to pay all the creditors, i.e. the company is insolvent.

3. Compulsory liquidation: This where a person, usually a creditor, petitions the court to make a winding-up order.

The Role of the Official Receiver and the Liquidator

The liquidator is the person responsible for managing the liquidation, in particular realising all assets and sharing out the proceeds amongst the creditors via a dividend.

In a members voluntary liquidation and a creditors voluntary liquidation, the liquidator is an insolvency practitioner, and the Official Receiver has no involvement.

In compulsory liquidations, the Official Receiver is usually appointed liquidator on the making of the winding-up order. In addition to his responsibilities as liquidator, the Official Receiver has further statutory duties, which include investigating the company's business activities and reporting to creditors. The Official Receiver also decides whether to call a meeting of creditors in order to appoint an insolvency practitioner as liquidator in his place - if an insolvency practitioner is appointed liquidator in the place of the Official Receiver, the Official Receiver still retains his investigatory and reporting duties.

There are cases where an insolvency practitioner is appointed liquidator on the making of a winding-up order, and in such cases therefore, the Official Receiver only has investigatory and reporting duties.

Finance7 will evaluate whether or not liquidation is appropriate to your company. Furthermore, we will demonstrate to the Director how they can best mitigate any personal losses that they might suffer due to personal guarantees they have given.

Most Directors find the Creditors meeting to be an intimidating process. We will represent the Directors at the meeting in order to reduce the possibility of the Director making any statement that may cause the insolvency practitioner or creditors to question their actions.

We will also assist the Director in answering the compulsory Directors questionnaire in order to further reduce the possibility of the Director being disqualified from holding further directorships.

Our many satisfied clients are testament to the value that Finance7 will add to the liquidation process.