In the second of a series of checklists for closing down companies, Jennifer Adams moves on to the more complicated processes involved in liquidation, both voluntary and under duress from creditors.
The previous article in this series on bringing companies to an end covered the ideal world - no debts, agreement between directors/shareholders and for the sake of the completion of a few paper formalities Companies House does the administration for you by striking off the company.
Nice and easy. Comments on Any Answers tell a different story when dealing with the ending of a company (for example What to do if company trying to strike own company off - but owe us money and have CCJ)
Insolvency legislation is complex and the winding up of a company should be undertaken only under advice from a Licenced Insolvency Practitioner. The actual procedure is similar whoever applies for the liquidation. The processes covered in the full article include:
- Members voluntary liquidation - Usually undertaken where the purpose of the company has been achieved or the owner wishes to retire rather than sell the company. The company is solvent such that all creditors’ claims can be settled in full.
- Creditors’ Voluntary Liquidation (CVL) - members hold meeting to pass the Special winding up resolution; same submissions and forms to Companies House, but creditors meeting must be held within 14 days of the resolution being passed with at least seven days’ notice must be given to all creditors.
- Compulsory Liquidation (IA 1986 s123) - Where the court makes a winding-up order on the petition of someone such as a creditor on the grounds that the company cannot pay its debts. The amount of debt owed must exceed £750 and the creditor must prove that he has not been paid three weeks after the sending of a statutory demand form 4.1.