Liquidation is a formal procedure known more commonly as ‘winding-up’. Liquidation is a last resort, the company’s assets are realised for its creditors and the affairs of the company are brought to a close.
Compulsory liquidation – commenced by a petitioning creditor and by Order of the Court only. It can also be commenced by shareholders of the Company.
Creditors’ voluntary liquidation – is a procedure, instigated by an insolvent company, by which the assets of the insolvent company are sold, and the proceeds are distributed to the company’s creditors. At the end of the liquidation, the company is dissolved.
Members voluntary liquidation – commenced by a solvent company were the members of the company wish to cease trading.
There are a number of detailed procedural requirements to each of the above processes which we would always advise a client to seek professional advice upon.
The effect of the liquidation is that the directors’ powers cease and the Liquidator will take over the running of the company and the directors appointments may be terminated.
It is difficult to give an estimate time as to how long a liquidation may take but they can last a matter of months or in exceptional cases they can last for two to three years. However, the liquidation will conclude when:
• all assets are have been realised;
• dividends are paid to the creditors;
• final meeting of the creditors/members is held;
• the liquidator is released by meeting or by Court;
• the final accounts of the company are filed with Companies House; and
• the company is dissolved.