There are three different types of liquidation. If the company is insolvent it could enter into a Creditors Voluntary Liquidation or Compulsory Liquidation. However, if the company is solvent but circumstances dictate that it should be wound up it could enter into a Members Voluntary Liquidation.
Creditors Voluntary Liquidation
What is a Creditors Voluntary Liquidation?
This route is usually the last resort for a company, as it is insolvent and cannot continue trading and is the most common form of Liquidation in the UK.
With the assistance of an Insolvency Practitioner, Directors would arrange meetings with the company members and creditors in order to wind the company up and appoint a Liquidator.
If the company had not already done so, it would now cease to trade.
All assets of the company including any book debts would be realised and proceeds of these would fund the cost of the liquidation and any excess funds would be available as a dividend to creditors in the order of priority.
If the company has insufficient assets to cover the associated costs the Liquidator may require the Directors to personally pay the costs. The level of these would be agreed between both parties prior to the Liquidator proceeding.
At the meeting of creditors, a report would be presented detailing the history of the company, its financial circumstances and why it has gone into Liquidation. Creditors would be given the opportunity to ask the Directors questions and would then formally vote for the appointment of a Liquidator.