Insolvent Liquidation

Insolvent LiquidationThere are two types of insolvent liquidation:

Creditors’ Voluntary Liquidation

If your business is unable to pay its debt as and when they are due and/or liabilities exceed assets and is therefore insolvent then a Creditors’ Voluntary Liquidation (“CVL”) is the most common method for you to wind up the company’s affairs.

Once the Directors have agreed with a Licensed Insolvency Practitioner that a CVL is appropriate, notices of meetings of shareholders and creditors will be issued. An advertisement is also placed in the London Gazette.

At the meeting of shareholders, a resolution to wind up the company will be passed and a Liquidator will be nominated. The Insolvency Practitioner is usually the nominated Liquidator.

At the meeting of creditors the Liquidator is appointed. This may or may not be the nominated Liquidator.

The appointed Liquidator is then responsible for all relevant administration duties, realising any company assets and, if funds permit, making distributions to creditors.

The Liquidator must also investigate the affairs of the company and, in particular, the conduct of the directors. He will submit a report to the Insolvency Service for them to consider if disqualification proceedings should be taken against any of the directors.

The Registrar of Companies will automatically dissolve the company three months after the final meeting.

The earlier the Directors take steps to liquidate an insolvent company the less chance they have of being held liable for wrongful trading (link to additional information). For further advice please contact Dunion & Co today by calling 01782 828 733 or e-mailing us on

Compulsory Liquidation

This is a Court procedure whereby a creditor of the company takes steps to wind the company up. The creditor will generally serve a Statutory Demand against the company or obtain a County Court Judgment, which is followed by a Winding up Petition, and then the Winding up Order. The Official Receiver will be appointed Liquidator on the making of the Order and the powers of the Directors will immediately cease.

A compulsory liquidation is forced on the company, rather than the directors or shareholders voluntarily taking steps to place it into liquidation.

Dependent upon the amount of assets in the company, the Official Receiver may decide to call a creditors’ meeting in order for creditors to appoint a licensed Insolvency Practitioner as Liquidator. The role of the Liquidator and/or Official Receiver is then the same as in a Creditors’ Voluntary Liquidation.

If your company has a winding up petition against it, it may still not be too late to place the company into voluntary liquidation or even a Company Voluntary Arrangement which could save your business, but you will need to seek advice from a Licensed Insolvency Practitioner as a matter of urgency.

For further advice please contact Dunion & Co today by calling 01782 828 733 or e-mailing us on

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