Solvent and Insolvent Liquidations

Members’ Voluntary Liquidation

A Members’ Voluntary Liquidation (“MVL”) is a process whereby an Insolvency Practitioner is appointed as the Liquidator of a solvent company to extract the shareholders’ capital in a quick and tax efficient manner or to reorganise a company. The process will only involve the Directors and a meeting of the company’s members, this process can be executed in a very short space of time.

As stated above, an MVL is an appropriate process where there is to be a reorganisation of group companies, retirement of a company’s owners or the completion of works which leads to the end of the requirement for a company.

Our fees for advising on and delivering an MVL can almost always be fixed and agreed with the Directors at the outset of the procedure.

A declaration of solvency must be sworn by a majority of the directors, confirming that all creditors can be paid in full, including statutory interest within 12 months.

The directors must be aware that it is a criminal offence to swear a declaration of solvency, when the company is not solvent, so they should exercise caution when doing so.

There is no investigation into the company’s financial affairs or a requirement to submit a directors’ conduct report as the company is solvent. Once the company’s assets have been distributed the liquidator ceases to act and the company is subsequently struck off.

The team at Live Recoveries are here to assist in the process of dealing with any residual creditor claims, assisting a company’s accountant in finalising returns to HM Revenue & Customs and distributing the capital to shareholders in a quick and efficient manner.

Creditors Voluntary Liquidation

A Creditors’ Voluntary Liquidation (“CVL”) is a process whereby an Insolvency Practitioner is appointed as the Liquidator of an insolvent company. The process is instigated by the Directors and can be executed in a relatively short space of time. With liquidation, a company usually ceases to trade, and its assets are sold off.

A Liquidation can sometimes be the only option available to a company.

The directors have a duty to provide specific information prior to the decision process that explains the demise of the company to its creditors and the company’s latest financial position in the form of a Statement of Affairs. We will assist the directors in these circumstances by preparing the necessary information on their behalf.

The liquidator is appointed by the shareholders, and that appointment is ratified by the creditors either by deemed consent or by a duly convened virtual creditors’ meeting.  However, creditors have the power to approve the liquidator’s appointment, or nominate an alternative, to attend a virtual meeting or request a physical meeting and question the directors and liquidator.

It should also be noted that a liquidator is required to investigate the company’s financial affairs and submit an assessment of the directors conduct to the Secretary of State within three months of the winding up resolutions.

The team at Live Recoveries understand that the closure of a business can be stressful, and we are here to support you through the process of liquidating a company.

Live Recoveries offers a full range of solutions, including liquidation, drawing on the team’s knowledge and experience. We strive to provide information about all relevant options available in the easiest of formats in order that informed decisions can be made by you.

This process can be undertaken to bring about the safe end of a company in a timely manner and reduce the potential risk of the directors incurring personal liability for wrongful trading.

Compulsory Liquidation

A compulsory liquidation is based upon an application to the Court and will be used mainly as a vehicle by creditors who cannot, in any other way, get recourse from the company.

It can also be used by directors where members of the company will not agree to the voluntary process and the directors are aware that the company is in financial trouble.

The company is placed into liquidation at a court hearing and an independent liquidator appointed may be appointed subsequent to the hearing, usually within 12 weeks of the winding-up order.  The liquidator’s duties are similar to those of a voluntary liquidator in realising the assets of the company and making a distribution to the creditors.

An investigation into the directors’ conduct is undertaken by the Official Receiver. The directors will be under added scrutiny, as they have not taken appropriate action to bring about the liquidation, have ignored all the warning signs and have allowed a creditor to force the company into liquidation.

As a result, the director(s) have not sought professional advice and are therefore more likely to have made errors and will be open to criticism for their conduct.  In serious cases they may face action for misfeasance, wrongful trading or trading whilst insolvent and in some cases disqualification from acting as a director.  The directors have a duty to co-operate with the liquidator and provide specific information relating to the demise of the company. Failure to do so can lead to private or public examination.

Once appointed, the liquidator has the power to deal with all the assets of the company, which includes selling them.

The liquidator agrees the claims of creditors and where appropriate, can make a distribution to those creditors out of the proceeds from asset realisation.

Once the liquidator has concluded his duties, the company would then be struck off.