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Compulsory
Liquidation > What
is Compulsory Liquidation?
What
types of liquidation are there?
- Members' voluntary liquidation
(or members' voluntary winding up) - this is when the shareholders
of a company decide to put it into liquidation, and there are enough
assets to pay all the debts of the company, i.e. the company is
solvent.
- Creditors' voluntary liquidation
(or creditors' voluntary winding up) - this is when the shareholders
of a company decide to put the company into liquidation, but there
are not enough assets to pay all the creditors, i.e. the company is
insolvent.
- Compulsory liquidation (or
compulsory winding up) - this is when the court makes an order for
the company to be wound up (a 'winding-up order') on the petition of
an appropriate person. If there is more than one director, all the
directors must jointly present the winding-up petition - a single
director cannot present a winding-up petition.
If you are a director or a
shareholder and you are also a creditor of your company, you may wish to
present a winding-up petition on the grounds that the company cannot pay
its debts. Please read our publication 'Dealing with debt - How to wind up a
company that owes you money' for more information.
Where
can I get advice about liquidation?
Before you take any action to put a
company into liquidation, you should obtain your own legal or financial
advice about this procedure and any other options available to you. You
can get advice from your local Citizens Advice Bureau, a solicitor, a
qualified accountant, an authorised insolvency practitioner, any
reputable financial adviser or a debt advice centre.
What
are the alternatives to liquidation?
There are 3 possibilities:
- Informal arrangement - the
company could consider writing to all its creditors to see if a
mutually acceptable agreement can be reached. It is advisable to
include a timetable of when payments will be made.
- Company voluntary arrangement (CVA)
- this is a formal version of the arrangement described above. The
directors would need to apply to the court with the help of an
authorised insolvency practitioner, who would supervise the
arrangement and pay the creditors in line with the accepted
proposals.
- Administration - this is a court
procedure that gives the company some breathing space from any
action by creditors. A court can grant an administration order to
enable the company to:
- survive, in whole or in part,
as an ongoing business;
- organise a voluntary
arrangement or compromise with its creditors;
- get a better realisation of
assets than would be possible if the company went into
liquidation.
The procedure is managed by an
administrator, who must be an authorised insolvency practitioner.
Further Information
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