Different Types of Liquidation. PDF

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Summary

Extensively detailed summary notes on the different types of liquidation methods....

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Types of Liquidation

 Who Petitions for Liquidation  ?

Used When What Resolutions are Needed? Procedure

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Member’s Voluntary Creditor’s Voluntary Liquidation Liquidation  The company The company (“voluntary”). (“voluntary”).  However usually Usually used when the entered into as a company simply wishes to result of creditor cease trading. pressure. Company is Solvent  Company is Insolvent  Special Resolution to Special Resolution to Wind up the Company Wind up the Company  Ordinary Resolution to Ordinary Resolution to Appoint a Liquidator Appoint a Liquidator  Directors recommend Directors must swear a Statutory Declaration a CVL to the members. that the company can pay  Members pass a its debts. Special Resolution to o Directors will be commence the liable for liquidation and an imprisonment/fin Ordinary Resolution e if they do not to appoint a liquidator. have grounds for making such a  A creditors’ meeting is held within 14 days of declaration (s89). the resolution (s98). A statement is made of o 7 days notice the company’s assets and liabilities. of the A GM is held to pass the creditors’ Shareholder Resolutions meeting must be given to the above. local press and The Director’s Statutory the London Declaration and the Gazette. Special Resolution to o Unsecured commence the liquidation must be filed at creditors may choose a Companies’ House. The liquidator takes over liquidator by a and notice of his simple majority (each creditor appointment is: o Given to all gets one vote per % of debt creditors. held). o Advertised in the o Secured London Gazette. creditors Liquidator collects the cannot vote. assets, realises the o Directors give a proceeds (sells the assets) and distributes these in sworn statement of the statutory order. There is a final meeting of the company’s the members. affairs.

Compulsory Liquidation

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Creditor applies to court for an order because the company is “insolvent” under s122 IA 1986. Hostile liquidation.

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Company is Insolvent None

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Winding up petition is presented to the court (s122). Company is unable to dispose of assets (s127). The petition is advertised in the London Gazette within 7 days. A court hearing is fixed. The court may make a winding up order if the s122 grounds are met. If a winding up order is made, notice of this is placed in the London Gazette and a local paper. If the creditors do not choose to appoint an independent insolvency practitioner, the Official Receiver will be the liquidator. The Director’s must present a statement of affairs within 14 days of the order. Liquidation proceeds. A final meeting of the creditors is held. A final return is filed with the Registrar and the Court. The Company is dissolved after 3 months.

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A final return is filed with the Registrar. The Company is dissolved after 3 months.

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Creditors’ Position

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No say in the liquidator’s appointment or the process. Usually paid in full because the company has to be solvent.

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Directors’ Position

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No exercise of powers UNLESS this is: o Sanctioned by liquidator or o By the members by a GM. They still officially hold office (s91(2)).

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Liquidator collects the assets, realises the proceeds (sells the assets) and distributes these in the statutory order. There is a final meeting of the members. A final return is filed with the Registrar. The Company is dissolved after 3 months. Creditor’s have control of the winding-up: they choose the liquidator (which takes precedence over the members’ choice). Unlikely to recover all of their money. A CVL is only usually utilised when the company is already in financial difficulty. No exercise of powers unless sanctioned by the liquidator. Still officially hold office.

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Can appoint a liquidator, or may leave decision to the court. Expensive, slow – court proceedings. Unlikely to recover all of their money.

Directors’ powers and office is terminated....