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The starting point for any company liquidation is determining how company liquidation or insolvency proceedings are initiated and what is involved. How much will it cost and how long will it take?
As an initial point of reference, Companies House offers guidance on Corporate Voluntary Arrangements, Liquidation, Receivership and Administration, as well as giving general information on insolvency. For most directors we strongly recommend taking professional advice before proceeding with any of these options. The professional service most suited to this area of the law is that offered by an Insolvency Practitioner.
General Company Liquidation Guidelines
The first thing to be addressed is the difference between a voluntary and a compulsory liquidation. Broadly speaking, a voluntary liquidation (which can be either a members’ voluntary liquidation or a creditors’ voluntary liquidation) is brought about by a resolution of the company and is usually conducted by an Insolvency Practitioner.
A compulsory liquidation is brought about by an order of the court and can be conducted by the Official Receiver or a qualified Insolvency Practitioner. Anyone undertaking the duties of Liquidator, Administrative Receiver, Administrator or Supervisor of a corporate voluntary arrangement should be a qualified insolvency practitioner. Those holding the position of Receiver or Manager do not need this qualification, nor does anyone who was already in office before the Insolvency Act 1986 (for England, Wales and Scotland).
Do insolvency proceedings mean the company is insolvent and will the company ever be removed from the Register? This is not always the case. In a Members’ Voluntary Liquidation, the directors of the company swear a statement, known as a ‘declaration of solvency’, to agree that the company will be able to pay all its debts within a period of twelve months or less.
Specifically, in the aforementioned circumstance the company is not classified as ‘insolvent’. Another question is whether a dissolved company can remain on the Register and whether dissolution can be deferred.
The Registrar cannot defer the dissolution which follows a liquidation proceeding. In some cases involving voluntary liquidation, an application can be sent to the court to defer dissolution. For compulsory liquidation, an application would be sent by an Insolvency Practitioner, to the Secretary of State in England and Wales, or to the Department for Trade, Enterprise and Investment in Northern Ireland. In Scotland, any application to be sent must be made to the court to defer the date of dissolution. The deferral notice / order must be filed with the Registrar following the registration of the concluding documentation in the liquidation and before the date of dissolution. Once dissolution takes place, you would need to apply to the court to have the dissolution declared void.
For more information please click our accredited Insolvency Practitioner link in the interactive portal above. The link will put you in direct contact with the professional service you require and has been independently verified by Bankruptcy.co.uk