Liquidation option, Liquidation as an Exit Strategy
Updated: 2nd November In its simplest form liquidation is a formal process which brings about the closure of a limited company. Once this has happened the company will cease to exist as a legal entity.
- Liquidation Definition
- Compulsory liquidation[ edit ] The parties which are entitled by law to liquidation option for the compulsory liquidation of a company vary from jurisdiction to jurisdiction, but generally, a petition may be lodged with the court for the compulsory liquidation of a company by: The company itself Any creditor which establishes a prima facie case Contributories: Those shareholders be required to contribute to the company's assets on liquidation   A ministerusually the one responsible for competition and business Grounds[ edit ] The grounds upon which an entity can apply to the court for an order of compulsory liquidation also vary between jurisdictions, but normally include: The company has so resolved The company was incorporated as a corporationand has not been issued with a trading certificate or equivalent within 12 months of registration It is an "old public company" i.
- Learn more about considerations to take when closing or selling a business.
Any outstanding debts owed by the company will be written off unless the director has personally guaranteed these borrowings.
Solvent vs Insolvent Liquidation If you are considering liquidating your limited company the first thing liquidation option understand is that there is more than one way a company can be liquidated.
There are three main types of liquidation, and while all seek to achieve the same end result — that is the formal closure of the company — each process is distinct. The procedure used to place your company into examples of fiat money depends mainly on its financial position at the time.
A company can be liquidated regardless of whether it is solvent or insolvent. While this is a voluntary process, a CVL is typically only entered into when there are few other alternatives open to the company. As this is a voluntary process, directors are able to appoint an insolvency practitioner of their choice and have some control over when the liquidation process commences.
Directors may be entitled to claim for redundancy should their company become insolvent which can be liquidation option valuable lifeline at a time when personal funds are likely to be tight. Making the decision to voluntarily place your company into the hands of a liquidator can also ensure you are acting responsibly as the director of a company which has found itself in an insolvent position.
As the director of a limited company, you have a number of legal obligations you must adhere to once you are aware your company is insolvent. One of these is placing the interests of your creditors above those of the company and its shareholders. In essence this means you form option not do anything to worsen the position of creditors, such as accruing additional debt or diminishing company assets.
Compulsory Liquidation WUC — In some cases a company will be liquidated by order of the court rather than voluntarily by its directors. The WUP will be heard by a judge, and if there is no liquidation option defence, a Winding Up Order will be granted which will lead to the company being forcibly wound up.
With compulsory liquidation an Official Receiver will be appointed to handle the winding up of the company and to deal with its creditors. The Official Receiver will be allocated by the courts, and their role will be to identify any company assets, realise these for the benefit of outstanding creditors, before formally winding up the company.
Updated Jul 9, What Is Liquidation? It is an event that usually occurs when a company is insolventmeaning it cannot pay its obligations when they are due. As company operations end, the remaining assets are used to pay creditors and shareholders, based on the priority of their claims. General partners are subject to liquidation. The term liquidation may also be used to refer to the selling of poor-performing goods at a price lower than the cost to the business, or at a price lower than the business desires.