The Different Types of Liquidation and Their Advantages

There are many instances where a business faces liquidation. It might be that the company simply cannot afford to pay its creditors, or the owners may have decided enough is enough. Whatever the reason for the liquidation, there are different types and with that in mind, here is an overview of each.

• Creditors Voluntary Liquidation (CVL) – Should the shareholders of a company jointly decide to wind up the business, this is called a Creditors Voluntary Liquidation and a Liquidator is nominated by the shareholders. The Liquidator’s role is to realise the sale of the company’s assets and distribute funds accordingly and they would report to the directors. The insolvency is controlled by a nominated practitioner who would handle the receivership from start to finish. If you are a shareholder in a business that is not performing, it is wise to seek the advice of a professional business advisory service, as making a wrong decision could be very costly.
• Members Voluntary Liquidation (MVL) – If the directors of a company swear a declaration of solvency, then a practitioner can be appointed to liquidate the company. This declaration would include details about how, in their considered opinion, the company can afford to repay its debts within a 12-month period. There are certain tax advantages by choosing MVL and there are specialist companies that provide insolvency services, ensuring the right decisions are made.
• Compulsory Liquidation – As the title suggests, the order to wind up the company is handed down by a court. This would be in response to an application made by a creditor, the directors, or the company itself. The best solution is to appoint a licensed insolvency practitioner, who can oversee the process. The Official Receiver might be appointed to liquidate the business and things move along as the court order is implemented. If the creditors have joined together to force the business closure, then there are no legal costs for the company and this can be the cheapest way to liquidate a company, should the directors choose to do so.

When a business if faced with insolvency, it is imperative to seek the advice of a professional business rescue organisation, who can examine the options and help you to choose the right path to liquidation. More often than not, the liquidation request will be made by the company directors, who, after some deliberation, have decided that insolvency is the best solution, and by enlisting the help of a licensed insolvency practitioner, everything will be smoothly implemented.

The Internet is always a good source of information and if you are looking for expert business advice, there are many online providers who are more than qualified to help. Involve the other shareholders in any discussions and with all the facts at your disposal, you will be in a position to make an informed decision regarding the future of the company.