What is Liquidation?
If you, as a director of the company, see that your business is insolvent and you choose to stop trading and close the company – this is a creditors’ voluntary liquidation (also referred to as a CVL). Once you have identified that continuing to trade will harm the chance of your creditors receiving payment for their debt, you should seek professional advice from a licensed Insolvency Practitioner to understand the options available to you at this point.
If the Insolvency Practitioner deems this the most appropriate action for your business, the company assets are then valued and sold with an aim to pay off the creditors. We are experienced in clients coming to us with the initial question of what is liquidation? then guiding them through the available types of liquidation and their best option. When it comes to making the right choice for your company’s financial future, a detailed understanding of the benefits of different types of liquidation is key.
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4 Key Questions on Company Liquidation
What is a Compulsory liquidation?
A compulsory liquidation is when the business has often fallen into debt, one which was previously a viable and profitable business but is no longer solvent and creditors are petitioning for the company to be liquidated for them to receive their outstanding debt.
The creditor has applied for a winding up petition for your company and they are requesting that the courts step in and close your business down. Once a winding up petition has been requested you should take steps to deal with this quickly, as once granted, the next stage is a winding up order whereby your company will be liquidated by an Insolvency Practitioner.
If your business is in the process of going into compulsory liquidation, it’s important to make sure you have an adviser to assist you through the process – we assist many businesses who have been put into compulsory liquidation and can explain your rights throughout the process. This is one of the types of liquidation that is most utilised in the UK, with our team offering a wealth of experience in the process that allows us to give our clients reliable advice at all times.
What is a Members’ Voluntary Liquidation?
Unlike a Creditors’ Voluntary Liquidation, this form of liquidation is whereby a company is solvent but you still want to liquidate the business. Liquidating your business this way isn’t the same as closing down your company through a “striking-off” with Companies House. It is often regarded as a tax efficient method of extracting any remaining value from a business when comparing to closing a business via Companies House.
What are the benefits of liquidating a company?
In a Creditors’ Voluntary Liquidation or Compulsory Liquidation, the company is technically insolvent and is unable to pay its creditors. The business should be closed down, with the assets being sold to pay its debts, as the business cannot survive and will not have a future. The main benefit comes in the fact that you hand off responsibility for your company to a professional liquidation expert. Once the process is underway, the insolvency practitioner is there to maximise returns to the creditors. The interests of the company are technically of no relevance.
In a Members’ Voluntary Liquidation, where the company is still solvent, the main benefit is in the efficiency with which you can get any remaining value for the shareholders. The aim of any type of liquidation is to maximise the return to creditors by winding up the company and realising its assets, so in this case the creditors are the members involved with choosing the liquidation. To discuss the benefits of different types of liquidation in more detail, you can speak to our team of experts.
How do I select the best liquidation services?
Contact us here at The Insolvency Experts for more information on liquidation, including the differences between different types of liquidation. or visit our ‘How does the liquidation process work?’ page first to get more information before you begin your discussion with us.
You can get in touch with our team here at The Insolvency Experts to discuss any concerns you may have regarding business liquidations, different types of liquidation or any other related matter. You can email us on email@example.com or alternatively, call us directly on 0300 303 8284.