Businesses in the UK go into liquidation every day. This is the process in which a business is brought to an end, with all assets of the company being redistributed. The liquidation process can be a stressful time, especially for the business owners and directors involved. Liquidation can be welcomed and planned, but often it is caused due to financial reasons etc. Hopefully, you will not find yourself in the liquidation process. If you do find yourself involved, however, here is some expert information on the liquidation process.
Voluntary Liquidation or Compulsory Liquidation
Voluntary liquidation can only occur if the shareholders agree to it. A liquidator must be an authorised insolvency practitioner and oversee the whole process. The two types of voluntary liquidation are members’ voluntary liquidation (MVL), and creditors’ voluntary liquidation (CVL).
Members’ Voluntary liquidation occurs when shareholders decide on liquidation and there are enough assets to cover all debts. An MVL can only take place if a company is solvent, holding no outstanding debts. There are other factors involved in an MVL, which you can discuss with our commercial team.
Compulsory liquidation is a procedure where the assets of a company are distributed to the company’s creditors. Compulsory liquidation is a court-based procedure called by the creditors.
The Role of a Liquidator
The main role of a liquidator is to ensure that all assets of the company are distributed fairly to the companies creditors. The liquidator will try and rescue the company, using a range of services, if this would accommodate a better return for the creditors. The liquidator is responsible for: achieving the best price for a company’s assets; addressing outstanding claims against the company; acting in the interest of the creditors. The order of distribution of company assets goes as follows: cost, charges and expenses of litigation; employee salaries; unsecured creditors; interest attached to a debt, debt owed to shareholders, such as profits.
Consequences of Liquidation
There are many consequences when a company is liquidated. One of the consequences is that the company can only run as a business in order to complete the liquidation. Usual business services cannot continue. All power of the directors are ended when a liquidator is appointed and the process begins. Liquidation also affects all of the employees of a company. Employees will no longer work for the company.
Get More Information on the Liquidation Process
You cannot tackle liquidation without expert advice and assistance. There are complicated rules and regulations surrounding liquidation. Our team of commercial lawyers will discuss your situation, and outline a comprehensive plan of some strategies to provide the best outcome. There are multiple options when considering Liquidation and insolvency. This could be a voluntary liquidation, administration, and a host of other options. Speak to one of our experts for more information on the liquidation process.