Why choose liquidation?
Liquidation is the only way to fully wind up the affairs of a company and end the existence of the company. An independent party undertakes the process and protects the interests of creditors, directors and members while the company structure is dismantled.
How can an insolvent company be wound up?
An insolvent company can either be wound up by the court, usually by one or more creditors making an application to the courts, or voluntarily by resolution of the company directors and, if appropriate, the company members at a relevant meeting.
What is a Court Liquidation?
The applicant must demonstrate to the court that the company is insolvent or can be deemed to be insolvent. The court will then appoint a liquidator, usually one nominated by the applicant (creditor). The court may also wind up a company when there are irreconcilable disputes between shareholders or directors, or for a limited number of other reasons.
What is a voluntary liquidation?
A voluntary liquidation is a process whereby the company voluntarily appoints a liquidator. Creditors have the right to change the appointed liquidator at any time. A voluntary liquidation can occur by a creditors’ voluntary winding up or through voluntary administration.
What is a members’ voluntary winding up?
A members’ voluntary winding up is the process for members who wish to dismantle the company structure. Usually the company will be solvent, and a members’ voluntary winding up is chosen as the company has no useful future.
What is a creditors’ voluntary winding up?
A creditors’ voluntary winding up is a process where the directors determine that the company is insolvent and resolve to place the company into liquidation and they appoint a liquidator. A meeting of creditors is held within 18 days (with an 11-day convening period and a 7-day notice period) of the resolution to wind up the company. At this meeting, the creditors have the opportunity to change the liquidator.
A creditors’ voluntary winding up is commonly used when a company is insolvent and a Deed of Company Arrangement (DOCA) is not possible and the company simply needs to be liquidated. If a wind-up application has been filed with the court, or if the court has ordered that company be wound up, a creditors’ voluntary winding up is not possible.