Liquidation is a legal process that pertains to partnerships or companies where a liquidator is selected to 'wind up' the dealings of a business.
At the beginning of limited company formation, you need good intentions, however, it does not always work the way you have planned. In some cases, it is better to liquidate the company, and at the end of the process, the company no longer exists. The reason for liquidation is to ensure that all the activities of the company have been treated and all its properties realised.
After completing this, the liquidator will proceed with the application to cut off the company from the register at the Companies House and dissolve it. This means that the company no longer exists.
There are two types of Liquidation, which are Voluntary Liquidation and Compulsory Liquidation. It is unlikely for the department to advise you on short bankruptcy matters like if a company requires to opt for obligatory insolvency or look at options. You need to obtain proper advice on these issues from a certified accountant or an authorised bankruptcy consultant.
Who looks after an obligatory liquidator?
The Official Receiver is responsible for taking care of the early phases of obligatory insolvency.
The Official Receiver will keep the creditors updated about the company and its contributors primarily known as investors that the company is being shut down. If there are noteworthy monies; a liquidation practitioner can be selected as a liquidator instead of the Official Receiver, at the beginning of the meeting with investors or creditors.
The job of the liquidator is to understand the assets of the company, process payments and charges that arise from the insolvency and portion out any remaining assets amongst the creditors. During unusual occasions, extra might be accessible for sharing to investors.
Who are Official Receivers?
The Official Receiver is a High Court Officer and a government worker. Moreover, to manage cases, the responsibility of an Official Receiver is to keep a check upon the dealings of people in insolvency and companies in liquidation. The Official Receiver reports any kind of illegal offences and behaviour, which might make a person unworthy to be a director of the firm to the Insolvency Service's Directors Disqualification Unit.
Compulsory liquidation is a bankruptcy procedure, which relates to businesses and is established by court instruction. A winding-up request is offered in the High Court, usually by a creditor declaring that the business is indebted to an amount of money they are not able to pay. Often, the business itself, its subscribers or directors may petition, as an administrator, the department, a clerk of petty sessions, the chief clerk, the Financial Services Authority, or the Official Receiver. A petition can be provided, even if a company is by now in voluntary liquidation.
A winding-up instruction can be organised even if the company is having no properties or argues the sum claimed. Any argument on the amount that is unpaid has to be settled with the creditors before making a winding-up order, as the consequence of the demand is serious.
Who are insolvency practitioners?
Insolvency practitioners function within the private sector and are accountants or solicitors. They need to be certified by any of the renowned professional bodies so that they can be operated as IPs. RPBs approve many IPs. The IPs operate as managerial receivers, administrators, or liquidators in creditors' voluntary liquidations.
This order can be provided if the business:
- Hasn't started trading within 12 months of its enlistment or has put on hold its dealings for a complete year.
- Is an 'old public company'.
- Is not able to pay its arrears and must be closed as the Court agrees that this is justifiable.
- It has two investors, apart from the fact that it has happened to be a plc by guarantee or shares.
- It has been Enrolled as a public limited company over one year before.
- However, it is yet to be issued with a trading document.