Liquidation

If a business is insolvent and does not have enough money to pay all of its debts, sometimes the only appropriate course of action is for a company to be placed into liquidation.  A Creditors Voluntary Liquidation is the most common way for directors and shareholders to deal voluntarily with their company’s insolvency.  In such circumstances, Justice Goddard Insolvency can act as company liquidator and assist directors in meeting their obligations.

A Creditors Voluntary Liquidation is likely appropriate when:

1. The company is insolvent and has no realistic prospect of returning to profitability.
2. The directors don’t feel they have the determination needed to rescue the company.
3. The directors believe that creditor pressure is likely to result in a winding up petition being issued
4. The directors believe that the overall position of creditors is worsening

In a CVL, the directors agree to convene meetings of shareholders and creditors in order to pass resolutions placing the company into liquidation. It is normal for the company to then cease trading, with the company’s employees being dismissed.

Once appointed by members and then creditors, the liquidator has three main duties:

1. To realise the company’s assets.
2. To agree the claims of the company’s creditors
3. To investigate the company’s affairs and the directors conduct.

As stated above, it is vital that directors are aware of their responsibilities with regard to insolvent trading and therefore professional advice should be sought as soon as it is realised that there may be a problem.