Voluntary Liquidation is the process by which the directors of a company, with the assistance of a licensed insolvency practitioner, put the company into liquidation.
A Creditors Voluntary Liquidation is appropriate when:
- The company is insolvent
- The company does not appear to be viable even if restructured
In order to put a company into Creditors Voluntary Liquidation a meeting of the company’s directors is held to instruct a licensed insolvency practitioner to assist them to convene meetings of the company’s members (shareholders) and creditors.
The members meeting is held first and it is at this meeting that the resolutions putting the company into Creditors Voluntary Liquidation and appointing a licensed insolvency practitioner as Liquidator, are passed. Immediately after that meeting the meeting of the company’s creditors is held. This gives creditors the opportunity to question the directors as to the reasons for the failure of the company and to put forward any alternate Liquidator.
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.
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