Creditors Voluntary Liquidation

What does it typically involve?

This process can be undertaken to bring about the safe end of a company without the directors incurring personal liability for wrongful trading.

It allows the directors, who realise that the company is in severe financial difficulties, to take appropriate action to bring the company’s activity to an end. Initially a directors’ meeting is held, followed by shareholders’ and creditors’ meetings.

The directors have a duty to provide specific information at the meetings that explain the demise of the company to its creditors and gives them an indication of the likely dividend prospects. We assist the directors in these circumstances by preparing the necessary information on their behalf.

The liquidator is appointed at the shareholders’ meeting, and at the subsequent creditors’ meeting, creditors have the power to attend and question the directors and liquidator and to propose an alternative nomination for liquidator.

Once appointed, the liquidator has the power to deal with all of the assets of the company, which may include selling them to a new venture controlled by the existing directors. This area is complicated and great care should be taken to ensure that the directors receive appropriate advice. The liquidator also agrees the claims of creditors and, where appropriate, can make a distribution to those creditors out of the proceeds from asset realisation.

The liquidator is required to investigate the actions of the directors and to report on their conduct, as well as taking further action to recover the assets of the company.

In serious cases, this could lead to the director being disqualified as a director. Once the liquidator has concluded his duties, the company would then be struck off.

View our Creditors Voluntary Liquidation Process.

We must stress that this is a brief overview and is not intended to allow a director to self-diagnose. We recommend that if you are under threat or considering entering liquidation, you contact us for a free consultation to ensure that you take the appropriate action.

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