Voluntary liquidation is also sometimes known as company winding up, and is a company liquidation process.
There are two types of voluntary liquidation:-
- members voluntary liquidation, where the company is solvent before it enters the liquidation process.
- creditors voluntary liquidation, where the company is insolvent and wants to go into liquidation.
Both voluntary liquidation processes involve company liquidation. In liquidation, or winding up, the company’s existence is effectively terminated. On the liquidation of a company, the company or companies in liquidation usually cease to trade immediately, although sometimes companies in liquidation may continue to trade temporarily as part of the liquidation process.
A liquidator is appointed over a company liquidation for both processes, and that liquidator will, as part of the liquidation process, liquidate assets of the company. As part of the liquidation process, the monies collected in following liquidation sales are then distributed to creditors who are owed money using a statutory priority order.
Members voluntary liquidation
A member’s voluntary liquidation is a voluntary liquidation process that allows a solvent company to go into liquidation. For a members voluntary liquidation to be able to follow the voluntary liquidation process and for a company to go into liquidation, the company’s directors must declare that the company is solvent and is able to pay all its debts in full with interest within the next 12 months.
A member’s voluntary liquidation is often used where a solvent company’s members wish to liquidate assets and cease trading. A liquidator is appointed over the company liquidation in the same way as for a creditors voluntary liquidation, in order to oversee the liquidation process.
Creditors voluntary liquidation
A creditors voluntary liquidation is a voluntary liquidation process that is instigated by the board of directors. It is a way of liquidating a company that is insolvent without relying on a creditor presenting a compulsory winding up petition to the court. This creditors liquidation therefore gives some degree of control to a business owner wanting to liquidate my company.
At Francis Wilks & Jones we act for companies in liquidation, or owners wishing to liquidate a company, either as a way of following the solvent liquidation process to liquidate assets and bring about the end of a company, or because the company is insolvent and the liquidation of a company is the best way for to proceed for their creditors. We can advise and act on all aspects of these processes. Contact the team today for advice.