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What is liquidation?

What is liquidation?

Liquidation is one of the most common insolvency procedures used when a UK limited company is in terminal decline with no prospect of rescue.   

The company is closed down and its assets dealt with by the liquidators. Any money available is divided between creditors.

If a limited company has come to the end of its life and needs to close down, with liabilities it cannot pay, then liquidation is often the procedure needed.

A company can go into liquidation in two ways:

Either being forced into compulsory liquidation by the court or voluntarily via a creditors voluntary liquidation (CVL) using a licensed insolvency practitioner.

A CVL is a process whereby the directors call a meeting of the shareholders and then a meeting of the creditors and seek approval to place the company into liquidation and appoint a liquidator

Although a CVL is called voluntary in the name it is not really something anyone in business sets out to do so I find the term voluntary a little can be misleading. 

It is termed voluntary because the directors and the shareholders decide to do it and are not forced to. 

David Kirk ACA FABRP

David Kirk

David Kirk is a Chartered Accountant and Licensed Insolvency Practitioner.
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