An insolvent liquidation is the process for closing down a company when it cannot afford to pay all its debts.
There are two types of insolvent liquidation. The most common is Creditors’ Voluntary Liquidation which is an out of court process initiated by the directors of the company. The other is a compulsory liquidation which is a court process and is normally initiated by a creditor of the company.
A CVL is often appropriate when the directors of a company realise the company cannot pay all its debts and want to use a licensed insolvency practitioner, such as Brailey Hicks, to help them to manage the process of closing the company.
Any fees will be paid from the realisations from the company’s assets. The initial fee will normally be agreed as a fixed fee. If the assets are insufficient to cover the cost an alternative procedure may be appropriate. We often assist directors to deal with insolvent companies which have very minimal or no assets and we never require the directors to pay from personal funds.
A compulsory liquidation is a court process which normally starts with a creditor (eg HMRC) issuing a winding up petition. The purpose of the liquidation will be the same as a CVL – to realise the company’s assets and pay creditors as much as possible. However, the directors will have less control over the process and timings.
If you have received a winding up petition and you cannot pay you should take appropriate professional advice immediately. It is never too late to speak with us. There are always options.
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