When a company’s assets are insufficient to cover its liabilities (i.e. it is Insolvent) and it is voluntarily placed into Liquidation, it is formally known as a Creditors Voluntary Liquidation.
The shareholders pass a resolution to place the company into Liquidation. The directors of the company produce a document known as a Statement of Affairs to show creditors what assets and liabilities the company has.
A creditors meeting is held within 14 days of passing the winding up resolution, usually it is straight after the shareholders meeting, where creditors ratify the identity of the Liquidator.
It is not only a limited company that can enter into Creditors’ Voluntary Liquidation – An LLP may also enter into creditors’ voluntary liquidation.