Creditors' Voluntary Liquidation

 

Although voluntary by name, a creditors’ voluntary liquidation usually occurs when directors of a company concede to the inevitable liquidation of the company and elect for the company to undergo voluntary liquidation rather than compulsory liquidation.

When is it available?

Creditors’ voluntary liquidation is only available to insolvent companies and is initiated by the directors of the company, usually on the basis of professional advice that the company is insolvent.

Continuing to run an insolvent company can result in actions against directors for fraudulent or wrongful trading, and so often directors will elect for a creditors’ voluntary liquidation rather than waiting for compulsory liquidation.

Putting it in place

The procedure for creditors’ voluntary liquidation starts with the directors calling a meeting of members. The directors of the company will recommend to the members that they pass a special resolution to the effect that the company cannot, by reason of its liabilities, continue to be in business and that it be wound up. The members will also need to pass an ordinary resolution to appoint a liquidator.

Within 14 days of the members’ meeting, a meeting of creditors is held where the directors must show a statement of the company’s assets and liabilities. The creditors have the opportunity to choose a different liquidator to the one chosen by the members. The liquidator will go on to sell the available assets and distribute the money to creditors in the statutory order.

It is vital that everything is done within the rules.

If you would like to obtain legal advice on creditors’ voluntary liquidation or advice about winding up an insolvent company, Contact Law can put you in touch with a local specialist insolvency solicitor free of charge. So, if you have any questions or would like our help in finding local Insolvency Solicitors please call us on 0800 1777 162 or complete the web-form above. 

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