Why You Need to Consult Experts For Voluntary Liquidation

In the wake of the global recession, liquidation or bankruptcy has become a common option for many companies. However, there are different types of liquidation applicable at different situations. The directors of the companies must be aware of them in order to avoid further complications.

One of the major bankruptcy options is voluntary liquidation. As the name suggests, in this type of liquidation, the directors take the decision to stop the company functioning. This is unlike compulsory liquidation where the directors have to follow the order of the court to seize the company. This later version is often the result of the complaint issued by the creditors of a company.

In voluntary liquidation, the directors of a company must take the help of a licensed insolvency practitioner. There are some subcategories and other complex procedures which require further explanation.

While liquidating a company voluntarily, there can be two different situations. The first one is the solvent liquidation also known as Members Voluntary Liquidation. For this type of liquidation, the company must have enough assets to pay off all its creditors. Otherwise it will be considered Creditors Voluntary Liquidation or insolvent liquidation. This later type of liquidation is however, the commonest form that companies take.

Conventionally, before putting the company on a Creditors Voluntary Liquidation, its directors hold a meeting with the expert licensed insolvency practitioner. This person would assist them in negotiations with the creditors and shareholders.

Prior to that, however, the members of the company meet together. There they decide over the fact that the company has to be put into liquidation and a licensed insolvency practitioner has to be involved. Just after that, the creditors of the company are called together. This is where the directors have to explain the exact reasons of the failure of the company to them. The outcome of the meetings must be made public through local newspapers.

When all of them agree to the decision, the liquidator comes in to play. Their first task is to examine the assets of the company. It is their responsibility to disburse the company's assets fairly amongst the creditors.

Once called for the Creditors Voluntary Liquidation, the company can not trade any more. The employees will have to be dismissed as well. Therefore before taking the decision, one must consider other options like administration arrangement or company voluntary arrangement.

This is another area that the Liquidator must look after. They will find out whether there is any chance for the company to be brought out of the crisis. Naturally, this is a very complicated task and can only be handled by a licensed professional.

There are situations, on the other hand, where Creditors Voluntary liquidation will be the perfect measure. For example, it will be a good idea if the business of the company is no longer relevant or the company is lacking the assets to pay the due. A similar situation may also arise when the directors gave up the hope of carrying on with the company. Contact Lines Henry today for free advice on Voluntary Liquidation.

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Gareth Taylor is author of this article on Voluntary Liquidation. Find more information about Voluntary Liquidation here.

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