Explore 800 Articles on Consolidating Your Debts
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| Liquidation | Explore 800 Articles on Consolidating Your Debts
LIQUIDATION
What is Liquidation?
Liquidation is, usually, a terminal procedure whereby a company is wound up either voluntarily (following an extraordinary or special resolution of members), or compulsorily (on the making of a winding up order by the court). Under Part IV of the Insolvency Act 1986, there are three separate procedures - a member's voluntary winding up where a company is solvent, a creditors' voluntary winding up for insolvent companies and a compulsory winding up by the court.
Once the process starts the company is administered by a liquidator who disposes of all assets, and distributes the proceeds to creditors and any remainder to shareholders. When the liquidation process is complete, the company is struck off the Companies Register and ceases to exist.
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CREDITORS VOLUNTARY LIQUIDATION (CVL)
Contrary to what it seems: a creditor’s voluntary liquidation is not initiated by the creditors, but by the directors of the company who approach an insolvency practitioner with a view to winding-up the company: this being due to the director’s assessment that the company is, or will be, insolvent. The creditor’s voluntary liquidation is the most widely used form of liquidation after the introduction of the Insolvency Act 1986.
The Procedure
The directors call a meeting of the members and creditors of the company in order to appoint a liquidator.
Members Meeting
The members appoint a liquidator.
Creditors meeting
The creditors either confirm the nomination of the members or appoint another liquidator. The creditor’s appointment of the liquidator takes priority over the members.
THE ROLE OF THE LIQUIDATOR
The role of the liquidator is to realise the assets of the company and to distribute them to the creditors as far as possible and any surplus thereafter to the shareholders.
There is a cost to liquidate the company payable by the company, for the fees of the liquidator. This fee, usually being a fraction of the debt owed by insolvent companies, is an attractive alternative (issues aside) to continuing to trade, or indeed, applying for a Company Voluntary Arrangement (CVA).
COMPULSORY LIQUIDATION
This form of winding up is instigated by a creditor who is owed £750 or more. The creditor presents to the court a winding up petition against the company. The company, its directors and shareholders may also present a winding up petition.
On the winding up order being made the official receiver will act as liquidator. If the company has assets the official receiver will either call a creditors meeting to appoint a liquidator or he may make an appointment under the powers given to him by the Secretary of State.
Here is a list of what to expect following a court order for ‘Compulsory Liquidation’:
If a liquidation order is granted against your company, this will mean:
1. You will not be allowed to be a company director;
2. Your company will be wound up by the official receiver;
3. Your personal bank accounts could be frozen; and
4. If you have made personal guarantees, you could be forced to sell your home.
STRIKING OFF
The alternative to a CVL (whilst the company remains insolvent) is to cease to trade: 'striking off'. There are two ways to do this:
a) Contact all interested parties (creditors, shareholders, employees...) and formally apply to the Registrar (of Companies) to be struck off the list. There are many conditions to be met, and not least that this option is not an alternative to insolvency action (however, with your creditors approval it is possible).
b) Do nothing, and wait for Companies House to strike off the company due to non-compliance of legislation (i.e. the lack of a yearly 'return', and or accounts), or the return of post as a 'gone away'. This way will affect your standing as a future director of any company.
Neither of the above can liquidate your creditors without their authorization, prior or after striking off: a creditor can appeal where they were not informed or little attempt was made to inform them.
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MEMBERS VOLUNTARY LIQUIDATION (MVL)
To wind-up a solvent company the directors swear a declaration of solvency stating that they can/will pay all creditors within twelve months. Followed within five weeks by a meeting of the shareholders (members) to adopt a resolution to wind-up the company: having the effect of placing the company in member’s voluntary liquidation: a liquidator is appointed who realizes all assets, and distributes funds within twelve months of the start of the member’s voluntary liquidation.
Thank you.
HEALTH CHECK
If you feel the STRESS is affecting your health then it may be advisable to end the cause of the stress. It may mean a few changes in your life, but remember that you've probably ridden a bumpy ride so far and shown how resourceful you are; so to end the cause may not necessarily mean an ending of a chapter, but the starting of a new one. You are resourceful, you are competent, so therefore a new start is maybe just what you need. You will find an article about stress should you need it within this website.
ADMINISTRATION ORDER (AO)
The Court will appoint an Administrator who again will be a licensed insolvency practitioner (IP) to represent the interests of creditors and shareholders in working with the company to develop a plan of reorganisation to get out of debt.
A proposal is made to the creditors by the company.
The proposal is usually a plan developed by the company in conjunction with the IP in order to achieve one of the four aims for which an Administration Order can be made by the Court. The proposal must be presented to a meeting of creditors who may vote upon the proposal. The size of a creditor's vote is directly proportional to the amount of the debt. A simple majority is all that is needed to accept the proposals. In addition, the creditors can also amend the proposal and again a simple majority is all that is required. The Administrator can also amend the proposal although this will require ratification by the creditors. Again a simple majority must be obtained.
A Creditors' Committee is also formed, although the purpose of this is merely to oversee the administration and the role of the Creditors' Committee is largely advisory.
The plan must be accepted by the creditors and confirmed by the Court. However, even if creditors or shareholders vote to reject the plan, the Court can disregard the vote and make any Order that it sees fit to make.
The purposes for which an Administration Order can be granted must be one of the following:-
a) The survival of the company;
b) The approval of a CVA;
c) The sanctioning of compromise between the company and third parties;
d) The more advantageous realisation of a company's assets than would be achieved on a winding up
The purpose of an administration order is to use the courts protection to enhance the survivability of a company that is experiencing short/medium term financial problems and/or the better realization of the company's assets.
The protection, in the form of a court order, forbids any form of legal or insolvency action without the courts permission. For instance, only an administration order can protect a lessee, from a lessor who is looking to recover goods. Also, an administration order can offer full protection to a voluntary arrangement.
If you owe less than £5,000 in total to two or more different creditors and have at least one County Court judgment against you then this Court monitored arrangement could be a good option. You will need to obtain Form N92 from your local County Court Office.
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About Being Debt Free That Is!!
And It Will Keep You In Debt
The Rest Of Your Life!
Hundreds use his secret to gain 100% debt freedom and live the “good life.”
You can too! In fact, his secret guarantees you will become debt free in as
little as 3 - 5 years no matter your income or where you live! Best part:
You can start shrinking your debt for FREE if you choose!
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RECEIVERSHIP
Administrative Receivership, better known as just ‘Receivership’ is a process under which the charge holder holds security by way of a Floating Charge, and appoints an Insolvency Practitioner known as ‘A Receiver’ to realise the assets which are subject to a Floating Charge. Typically this will be a bank who holds the Floating Charge by way of security over assets which due to their nature e.g. they are perishables cannot be properly made subject of a fixed charge.
The Receiver will actually take control of the company and sell the assets which are the subject of the Floating Charge and apportion those funds realised firstly to the discharge of the floating charge holders' debt.
If there are any funds left over these are first appropriated to the costs of the Receiver and then returned to the company.
At the end of the Receivership, there are a number of routes which can be taken as follows:-
(a) The company can be returned to the directors and shareholders;
(b) The company can go into administration;
(c) The company can be wound up;
(d) The company can go into a CVA.
WINDING-UP
Some companies are so far in debt that they can't continue their business operations. They are likely to "liquidate". Their assets are sold for cash by a court appointed liquidator who is an IP. Administrative and legal expenses are paid first, and the remainder goes to creditors.
Secured creditors will have their collateral returned to them. If the charged asset does not realise sufficient funds to repay them in full, they will be grouped with other unsecured creditors for the rest of their claim. Unsecured creditors will be notified of the liquidation and should file a claim in case there is money left for them to receive a payment. The order of priority of creditors is the same as set out above in respect of Administration Orders.
Shareholders generally don't receive anything in return for their investment. But, in the unlikely event that creditors are paid in full, shareholders will be notified and given an opportunity to file claims for anything left over.
BANKRUPTCY
If you have given a personal guarantee for the debts of a limited company, you are liable for these debts and can be made bankrupt. See bankrupt section later.
DOING NOTHING
This maybe a strange title, but nonetheless is what a majority of people do when the first encounter a need to consider if their company is insolvent.
If you recall in our earlier explanation, part of insolvency is the inability to pay your debts on time. It is here where ‘Doing Nothing’ will begin to take effect. Your suppliers will be patient to a degree until they begin to push for payment, this may even lead to suing through the courts
If a supplier suspects that your poor trading position is having a damaging effect they can themselves as a creditor, or group together with several creditors, so that their single debt total or group debt total is more than £750, can ask a court to wind up your company. For this reason do not ignore your creditors; it is important to answer their letters and calls.
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Everything You Know Is Wrong!
About Being Debt Free That Is!!
And It Will Keep You In Debt
The Rest Of Your Life!
Hundreds use his secret to gain 100% debt freedom and live the “good life.”
You can too! In fact, his secret guarantees you will become debt free in as
little as 3 - 5 years no matter your income or where you live! Best part:
You can start shrinking your debt for FREE if you choose!
Click on the BLUE link Being Debt Free for more information
**** ooo000ooo****
**** ooo000ooo****
Get Out Of Debt Fast
Without Bankruptcy Or Debt Consolidation.
Click Here To Learn The Amazing Secrets
Of How I Got Rid Of $63,000 Of Debt
In Only 4 Months Without Filing Bankruptcy
Or Using Any Type Of Debt Consolidation Service!
Click on the BLUE link Get Out of Debt Fast for more information
**** ooo000ooo****
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Get Out Of Debt
The Debt Buster System
Powerful Information Based On Proven
Techniques And Strategies To Get Out Of Debt
Without Bankruptcy. Repair Bad Credit Fast!
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Debt Eliminatrix(TM)
Debt Elimination System
Now, Everyone Can Legally & Ethically
Wipe-out All Of Their Debt
(Including Their Mortgages)
With The Money They Already Make,
Without Going Into Credit Counselling
Or Filing Bankruptcy, In A Just A Few Short Years,
Following A Simple And Easy System!
Click on the BLUE link Debt Elimination for more information
**** ooo000ooo****
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CREDIT SECRETS BIBLE™
If You Can Read And Write
at the 5th Grade Level Then I Can
Show You The Secrets To Raise Your
Credit Score up to 249 Points
In 90 Days... and Get APPROVED For
The CAR, HOME, Business Loans,
and CREDIT CARDS You Deserve!
Click on the BLUE link Credit Secrets for more information
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Explore 800 Articles on Consolidating Your Debts
DISCLAIMER – Reading and understanding the legalities of Liquidation and Bankruptcy on this website is no substitute for proper legal advice. Whilst the information within this website is a good guide, there maybe situations where the information is not understood correctly or miss-interpreted.
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