Liquidation

There are three different types of liquidation that a company can enter. If the Company is insolvent on a cash flow basis or on a balance sheet basis then Creditors voluntary liquidation or Compulsory liquidation will be appropriate. Should the Company be solvent but require winding down in a controlled manner then Members voluntary liquidation is likely to be appropriate.

Creditors voluntary liquidation is the most common form of liquidation in the UK despite being a last resort for a company that is struggling and cannot continue to trade. The decision to enter a Creditors voluntary liquidation is taken by the directors and shareholders of the company. The case would be administered by a commercial Insolvency Practitioner.

A Compulsory liquidation comes when a creditor or Director issues a winding up petition to the court and if accepted, the company is then forced into liquidation. The case would be administered by the Official Receiver.

Finally, a Members voluntary liquidation only occurs when a company that can comfortably pay off its creditors and the directors decide to wind the company up for their own reasons (perhaps due to retirement). Once the company enter a Members voluntary liquidation the assets are sold off and the liquidators fees are covered as well as all creditors being paid in full

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