Corporate Insolvency
When we use the term “corporate” this will usually apply to a limited company, but in most instances described below, it will also apply to a partnership or a limited liability partnership (LLP). If you are a sole trader or an individual please see the personal information pages.
“Our advice will help minimise the impact of any insolvency process on a company’s stakeholders”
Sometimes, the failure of a company is inevitable. It is important for the directors to recognise that if their company has come to the end of its life they must take steps to minimise the loss to creditors. It may still be possible to extract the assets of business, place them in a new company and for the directors to continue running that new company in the future. However, it is more likely that the assets are sold and the business ceases.
Voluntary Liquidation
Compulsory Liquidation
Voluntary Liquidation
A “Voluntary Liquidation” is just that – the directors and shareholders voluntarily take steps to place the company into liquidation, rather than it being “forced” into liquidation through the compulsory liquidation process.
Creditors Voluntary Liquidation
This procedure only applies to an insolvent company. The process is started by the directors and the shareholders then put the company into liquidation and appoint a Liquidator. Ultimately a meeting of creditors must be held for them either to confirm the appointment of the shareholders’ Liquidator or to appoint a different Liquidator of their choice. It is usual for the creditors to confirm the appointment of the Liquidator appointed by the shareholders.
The Liquidator then sells the assets and distributes the funds realised, after costs, to creditors. The Liquidator must also investigate the affairs of the company and in particular the conduct of the directors. He will submit a report to the Insolvency Service for them to consider if disqualification proceedings should be taken against any of the directors.
Members Voluntary Liquidation
Members Voluntary Liquidation applies only to a solvent company. More information on Solvent Liquidation / Restructuring a business.
Compulsory Liquidation
A compulsory liquidation is forced on the company rather than the directors or shareholders voluntarily taking steps to place it into liquidation. A winding-up petition must be presented to the Court, most commonly by a creditor, but directors can also present one, and a Judge decides if a winding-up Order should be made to put the company into liquidation.
Once a winding-up order is made, the Official Receiver becomes Liquidator of the company. The Official Receiver may decide to call a creditors’ meeting in order for creditors to appoint a licensed Insolvency Practitioner as Liquidator in the Official Receiver’s place. The role of the Liquidator and/or Official Receiver is then the same as in a Creditors Voluntary Liquidation.
