Voluntary Liquidation is a process where by directors of a company put it into liquidation. The directors do it with the help of an insolvency practitioner who is licensed. Voluntary Liquidation is a bit adverse to a Compulsory Liquidation which is a process through which creditors can have petitions issued by the Court in order to stop the company from trading and increasing the debt.

In case the company has sufficient assets which are believed to be enough to pay back its creditors entirely, the situation is called solvent liquidation. It is also known as Members Voluntary Liquidation or Creditors Voluntary Liquidation. These are the mostly practiced forms of Voluntary Liquidation.

Generally the company is put into Creditors Voluntary Liquidation in a meeting of the directors of the company. The meeting is held with a licensed insolvency practitioner who helps in calling meetings of the company's creditors and members (shareholders).

First, the meeting of the members is held. Then, the resolutions of placing the company under Creditors Voluntary Liquidation are passed. After that the appointment of a licensed insolvency practitioner is made and they start acting as a Liquidator.

Soon after this meeting, the company's creditors hold another meeting which is also attended by the directors. In this meeting, the creditors ask from the directors the reasons that contributed to the collapse of the company.

Creditors Voluntary Liquidation is the most effective weapon which helps in dealing with an insolvent company very effectively. Through the Creditors Voluntary Liquidation, the shareholders or the directors of the company take the decision of placing the company into liquidation as it is already declared to be insolvent.

While placing the company into liquidation, the creditors appoint a licensed Insolvency Practitioner. They work as the liquidator of the solvent company. The key responsibilities of the liquidator are collecting the company's assets and distributing them to the creditors of the company.

The company generally stops all its trading as soon as it is put into Creditors Voluntary Liquidation. Under the supervision of the liquidator, the assets of the company are assessed so that the creditors may receive their dues. The employees of the company are also made redundant. However, there are certain exceptions to this rule. If the company has previous contracts; it is allowed to continue to trade if they can be fulfilled.

A board meeting is generally held in order for the liquidator to be updated as to the company's position. The meeting also seeks to advise all the directors of the company as well as to help in calling meetings of the members and creditors of the company. The meeting of the creditors and members is generally held the same day when all the proceedings take place. The venue of the meeting is decided keeping in mind the convenience of all the creditors. For all liquidation advice seek the advice of a licensed insolvency practitioner. Lines Henry can advice on all aspects of company and individual liquidation issues.

Author: Gareth Taylor

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Gareth Taylor is author of this article on Voluntary Liquidation.
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