Insolvent Liquidation (Creditors Voluntary Liquidation)
A company is insolvent if it either does not have enough assets to cover its debts (i.e. value of assets is less than amount of liabilities), or if it is unable to pay its debts as they fall due. In the event that a company becomes insolvent it is vital that the company directors take advice from a qualified insolvency professional.
In many cases liquidation is seen as a last resort by company directors. As a result three things often occur;
- Shareholders and/or directors invest further funds that will not be recovered
- Creditors’ positions are worsened
- Asset values (including any possible goodwill) are eroded
When advice is sought early these outcomes can be avoided.
Upon liquidation the Liquidator has a duty to collect in the company assets and realise them for the benefit of the company. It is possible for the Liquidator to sell the assets to the former directors of the company if this represents the best outcome. For a director, acquiring company assets from a Liquidator can often be more beneficial than acquiring the assets prior to Liquidation and will certainly draw less criticism from creditors as the transaction will be fully disclosed and subject to professional advice.
Company directors have specific duties prescribed by law and it is imperative that you are aware of these duties to protect yourself from potential actions that could be taken either by a Liquidator or BERR (formerly the DTI).
A Creditor’s Voluntary Liquidation is commenced at the request of the company directors and will require the assistance of an Insolvency Practitioner.
If you would like to discuss matters please complete the enquiry form in the Contact Us section to receive a call back or telephone on 01242 250 811 to receive more information. All matters discussed will remain completely confidential and no fee will be charged for the initial meeting should one be arranged.
