Definitions

Liquidation

CREDITORS VOLUNTARY LIQUIDATION

The creditors voluntary liquidation is the most widely used form of liquidation after the introduction of the Insolvency Act 1986. This form of winding-up is used when the company is insolvent by not having enough assets to cover its debts ( i.e. the value of assets is less than the amount of liabilities) or is unable to pay its debts when they fall due.

Procedure
The directors call meetings of the members and creditors of the company in order to appoint a liquidator.

Members Meeting
The members appoint a liquidator.

Creditors meeting
The creditors either confirm the nomination of the members or appoint another liquidator. The creditors appointment of the liquidator takes priority over the members.

The Role of the liquidator
The role of the liquidator is to realise the assets of the company and to distribute them to the creditors as far as possible and any surplus thereafter to the shareholders.

COMPULSORY LIQUIDATION

This form of winding up is instigated by a creditor who is owed £750 or more. The creditor presents to the court a winding up petition against the company. The company, its directors and shareholders may also present a winding up petition.

On the winding up order being made the official receiver will act as liquidator. If the company has assets the official receiver will either call a creditors meeting to appoint a liquidator or he may make an appointment under the powers given to him by the Secretary of State.

The role of the liquidator is to realise the assets of the company and to distribute them to the creditors.

Definitions 2