What is a Voluntary Liquidation?
A voluntary liquidation is an alternative to a compulsory winding up order before the Court. There are two seperate types of voluntary liquidation, namely:
- A Members Voluntary Liquidation – which is normally reserved for solvent companies.
2. A Creditors Voluntary Liquidation – which is generally reserved for insolvent companies.
Both forms of liquidation in practice bring the company to the end of its trading life, and involve realisation of the company’s assets in order to pay stakeholders (primarily creditors) as much as possible.
A Members Voluntary liquidation is used when the company is solvent and is able to repay all of its debts, interest and costs within 12 months, with any remaining funds being returned to the shareholders of the business after all the fees have been paid.
Where a company is insolvent the directors and shareholders can take steps to place a company into Creditors Voluntary Liquidation in order to bring the company to the end of its natural life. Directors ought not to continue trading, to avoid potential proceedings that may be brought by the liquidator susequently, beyond the point of any time when they knew or ought to have concluded that a company could not avoid an insolvent liquidation.
How Do I Liquidate My Company?
Instruct TaxGone to assist in the preparation of the paperwork and collate all the initial information that is required for liquidating.
It is not too late to place your company into liquidation even if your company has a Winding up Petition. To do so may be in the best interest of the creditors, since Secretary of State fees (a form of Government taxation in a compulsory liquidation) apply in compulsory liquidations but not in CVLs, which can be significant.
Once TaxGone has received instructions to assist in the preparation for a liquidation, events move quickly. A licensed Insolvency Practitioner is instructed and meetings of the company’s shareholders are convened and the process for the liquidation can commence.
It is important to remember that your view on your own company may be based on the creditor pressure that you receive on a daily basis and that this view may be changed if you read our section on Company Voluntary Arrangements (CVA’s).
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Creditors Voluntary Liquidation
Frequently Asked Questions
Can We Use The Same Company Name Again?
Whilst it is possible to purchase the name, a restriction is imposed at s216 of the Insolvency Act 1986 on reuse of company names. This prohibition applies unless one of the statutory exemptions apply, (including where the whole or substantially the whole of the business of the company placed into liquidation including its name) is purchased. Specialist advice is required from independent solicitors, and you ought to consult the Liquidator appointed.
What Are TaxGone Charges To Assist In Putting A Creditors Voluntary Liquidation In Place
TaxGone do not charge for their services in assisting with the preparation of Creditors Voluntary Liquidations. TaxGone forms part of the same group of companies as Silke & Co, a licensed insolvency firm. In the event that Silke & Co are instructed to assist with placing the company into liquidation then they will charge a Statement of Affairs fee and if they are appointed as liquidators they will be entitled to draw remuneration for acting as liquidator from any realisations achieved in the liquidation.
What Are The Liquidators Duties?
A Liquidator has a number of duties including realising assets and paying any remaining funds after paying the costs back to the creditors. Creditors will be notified of any distribution to be made to them and receive an account and report of liquidation on an annual basis.
A liquidator has a duty to investigate the affairs of a company in a Creditors Voluntary Liquidation. If the standard of conduct of the directors has fallen below that of the reasonably prudent director, then the liquidator:
- Will have to report this to the Secretary of State for Business, Energy and Industrial Strategy, who could (subject to it being in the public interest to do so) bring proceedings pursuant to the Company Directors’ Disqualification Act 1986 against the relevant directors: and
- May consider whether to bring antecedent transaction claims (proceedings for financial gain) against the directors.
What Will My Bank Say If I Liquidated My Company?
If your bank does not hold a debenture against your company or a personal guarantee then they will rank alongside the other unsecured creditors of the company.
A winding up petition has to be advertised in the Gazette, which can often lead to your bank account getting frozen. Banks have a system in place to spot petitions, and when they become aware that one of their customers is subject to a winding up petition ordinarily the relevent financial institution with which the company banks will freeze the company’s bank accounts.
This can significantly adversely impact upon a company’s ability to pay its creditors as and when the same fall due. We can assist the company in making an application for a validation order, an order of the Court authorising a company subject to a petition to pay specified creditors, so as to keep trading pending finding a solution to dispose of any winding up petition including payment of the petition debt.
TaxGone can assist in attempting to prevent this by assisting the company in applying to Court for a validation order, for specified payments to be made from the frozen bank account.
The bank should reopen the company bank account once they have received written evidence that a Winding up Petition has been dismissed.
TaxGone can also assist with instructing a Barrister or solicitor to seek an adjournment of the Winding up Petition whilst a Company Voluntary Arrangement is prepared and/or after options are explored.