Voluntary Liquidation Options

If you’re looking to place an insolvent company into liquidation, this process is called Creditors’ Voluntary Liquidation. If you’re considering liquidation for a solvent company, the process is Members’ Voluntary Liquidation.

Numerous companies trading in the UK at present may find themselves in an insolvent position but many may still be viable businesses and simply suffering from short-term cash-flow problems. However it’s time to take action if you feel that your company cannot continue trading without worsening the position of its creditors.

If you’re looking to place an insolvent company into liquidation, this process is called Creditors’ Voluntary Liquidation – known as a CVL. This solution is appropriate when there is no other option than the company ceasing to trade and being wound-up. In a CVL, assets are realised and sold with a view to paying a dividend to creditors where possible.

Your company is insolvent if its liabilities exceed its assets, and/or it cannot pay its debts when they fall due, and there is no prospect of the company continuing to trade. Under these circumstances, with assistance of the directors, the shareholders place the company into liquidation with the creditors having the final vote on the choice of Liquidator. We are qualified to undertake the role of Liquidator, using our extensive experience and expertise to secure the best outcome.

If you’re looking to place a solvent company into liquidation, the process is called Members’ Voluntary Liquidation – known as an MVL. This enables directors and shareholders to close down a solvent company and for any remaining assets – after creditors have been paid in full – to be distributed to its shareholders in a tax-efficient manner.

It can also be used to close down a subsidiary (within a group of companies) that has outlived its usefulness.  Shareholders appoint a liquidator, and a Statutory Declaration of Solvency is required, stating that the directors have conducted a full enquiry of company affairs and believe that it can repay its debts, with interest, within a 12-month period.

The liquidator is appointed at an extraordinary general meeting of the company, if approved by 75% of shareholders’ votes. The liquidator realises the company assets, settles any creditor claims and distributes the remaining assets to shareholders.

Our partners are licensed insolvency practitioners, so they can accept appointments as liquidators, using their industry knowledge to seek optimum results that will benefit all parties.

It is extremely important that the full tax implications are considered by the directors before selecting the Members’ Voluntary Liquidation option. If you need to know more about voluntary liquidation and how to begin the process, you can arrange a free consultation with one of our insolvency specialists at a regional Begbies Traynor office.