No director or business owner wants to put their company into insolvent liquidation however the Creditors' Voluntary Liquidation allows them to move on from a failing business.
It is important to recognise when a company is continuing to trade without reasonable prospect of avoiding insolvent liquidation.
Reasons for winding up a company Members' voluntary winding up The company’s contributories (also known as members or shareholders) may pass a resolution that the company be wound up and that a liquidator be appointed.
Overview Liquidation is a process where the company’s assets are seized and realised, with the resulting proceeds used to pay off its debts and liabilities.
Any surplus is then distributed among the contributories of the company according to their rights and interests, or otherwise dealt with as the constitution of the company directs.
A change in legislation or increased competition may make a previously profitable company no longer viable.
A company may continue to trade through a difficult few years in the hope of returning to profitability while accumulating debt with the bank or falling behind with payments to HMRC or suppliers.
Whether the trust is the product of a bankruptcy plan or a state law plan of dissolution, certain factors must be considered. Section 1123(b)(3)(B) of the Bankruptcy Code allows this prospect to be avoided.