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Arranging Liquidation with Creditors

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When a company is seeking voluntary liquidation, one of the most important aspects in order to stay within the confines of the law is to make arrangements to settle up with creditors. Unlike a Voluntary Arrangement with creditors, sometimes referred to as a Voluntary Agreement with creditors, the process of liquidation is much more complicated. A voluntary arrangement is a binding agreement between a company and its creditors whereby payments are made over a period of time whilst the company is still in business under the same directors. The agreement must be kept and is legally binding, but the company intends to continue business as usual to a large extent.

Voluntary Creditor's Liquidation, on the other hand is where a company realises it is not solvent and is in danger of being bankrupted. At this point the director will call a meeting of the members to adopt a resolution to liquidate the company. If the members vote in favour of Voluntary Creditors' Liquidation a liquidator is appointed. The proposed liquidation will be advertised in the Gazette as well as in two newspapers local to the business. The member appointed liquidator will then call a meeting of the creditors to get their acceptance or refusal by a vote.

If they are in agreement, the voluntary liquidation creditors will then appoint their own liquidator to oversee the procedure until completion. Debts are prioritized according to legal outlines and those bills are satisfied first in order of priority. As an example, outstanding taxes take precedence over even the largest commercial debt. During the next 12 month period, the creditors appointed liquidator will liquidate as many assets as possible to pay off debts. If all debts are paid and there is any revenue left over it will be distributed to the members. If your business is insolvent, the first thing you should do would be to contract the services of an Insolvency Practitioner to provide the advice you need to accomplish voluntary liquidation if that is what he/she recommends.

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