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Winding up a Company

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When the director and shareholders choose to wind up a company there are certain conditions which must be met before choosing the best method of liquidation. Member Voluntary Liquidation can only be sought it the company is solvent. If the company is not solvent within five weeks prior to resolving to liquidate then Creditors' Voluntary Liquidation would be the procedure to follow. Even so, most often winding up liquidation is a pretty straightforward procedure because each step has been outlined and must legally be followed.

Members' Voluntary Liquidation, MVL, as stated above can only be used for companies that are solvent within the five weeks prior to the winding up resolution. This resolution must include a declaration to that effect, that the company is solvent and has been so for at least those five weeks. In this statement the company's liabilities and assets must be itemized and it should state that all creditors are paid in full, or will be within the next 12 month period, and with interest. Make no mistake. It is a criminal offense to falsify these statements by swearing false declarations.

If the company is not solvent during that time then insolvency liquidation takes on the form of Creditors' Voluntary Liquidation which follows another set of guidelines and is structured differently. In either case, a liquidator is appointed to realise assets. Most often the liquidator will pursue retail liquidation companies if there are products or other tangible items which must be sold separate from any real property or business operations which are sold independently, usually through a broker. Once the assets are liquidated, all creditors are paid and if there is anything remaining it is distributed to members accordingly. Since these duties are very specific under UK law, the liquidator is an Insolvency Professional who is duly licensed and liable to uphold the law to the fullest extent.

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