The following Property guidance note provides comprehensive and up to date legal information covering:
'Liquidation' or 'winding up' is the process by which a company is brought to an end. When a company is liquidated its business is terminated, although it may need to be carried on temporarily as part of the winding-up process (eg to enforce any valuable contracts), its assets are realised and the proceeds are distributed to those entitled.
Liquidation may be either insolvent or solvent, and may be commenced:
by court order ('compulsory liquidation'), or
out of court (‘voluntary liquidation’)
A voluntary liquidation of:
an insolvent company is a creditors' voluntary liquidation ('CVL')
a solvent company is a members' voluntary liquidation ('MVL') and is dependent on a declaration of solvency by the directors
The parties to whom a liquidator is answerable depends on the type of liquidation:
MVL—the liquidator must primarily consider the interests of the shareholders who have appointed him
CVL—the interests of creditors come first; a creditors' meeting is required to be held within 14 days of the winding-up resolution at which the creditors have the right to appoint the liquidator and to establish a liquidation committee to oversee the conduct of the liquidation
Compulsory liquidation—the interests of creditors are also central and they have similar rights to hold a creditors’ meeting, to appoint a liquidator and to establish a liquidation committee
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