Summit Law LLP act on behalf of businesses and insolvency practitioners in relation to both compulsory and creditors’ voluntary liquidations.
Compulsory liquidations are put in place by way of a court order, mostly after a creditor has successfully wound the company up.
Once the court order is made to wind up the company, an official receiver is appointed and takes control of the company together with its assets. The official receiver may then delegate its role to a chosen insolvency practitioner. The official receiver and/or insolvency practitioner is then known as the “liquidator” of the company.
The liquidator will compile a list of all creditors of the company and seek to realise the company’s assets in order to pay those creditors.
Creditors’ Voluntary Liquidation
Creditors’ Voluntary Liquidations (also known as a “CVL”) is an arranged that is agreed between the directors of a company, the creditors and company members. The arrangement will allow for the voluntary winding down of the company and the liquidation of its assets.
Like in a compulsory liquidation, an insolvency practitioner is still appointed who takes over the control of the company. The previous directors must the comply with all reasonable requests of the insolvency practitioner.
The advantages of a CVL include:
- Minimises the risk of directors wrongfully trading
- Taking the pressure away from debts owed
- Appointing your own chosen insolvency practitioner
- Potentially buying back assets
There are also disadvantages to a CVL, such as personal guarantees being called in, the company ceasing to trade and an investigation being carried out by an insolvency practitioner so it is important that you seek advice at an early stage to explore all options available to you.