W hat is creditors’ voluntary
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What is creditors’ voluntary liquidation? PowerPoint PPT Presentation


Voluntary liquidation begins when the directors of a company decide so jointly and voluntarily or when the Court orders for it and makes it a compulsory step to be taken.

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What is creditors’ voluntary liquidation?

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What is creditors voluntary liquidation

W hat is creditors’ voluntary

liquidation?

To begin with:

Voluntary liquidation begins when the directors of a company decide so

jointly and voluntarily or when the

Court orders for it and makes it a

compulsory step to be taken. In

either case, a liquidator is appointed

who ends the existence of a

company and gets it dissolved.

Liquidation: The types

i.

Members’

liquidation: This is when a

voluntary

liquidation that can – after becoming solvent - can pay all its

creditors in full.

ii.

Creditors’ voluntary liquidation: This is when a company is

insolvent and is unable to pay fully to the creditors. Still, the

liquidation occurs.

iii.

Compulsory liquidation: Company is dissolved by order of the

Court in case of insolvency, the action instigated usually by a

creditor.

voluntary

decision

for

Corporate Insolvency: A brief note

The Insolvency Act 1986 S123 devises to check if a company is insolvent

through two tests.


What is creditors voluntary liquidation

A. By checking if a company’s realisable value in terms of its assets is more

than its liability. This is inclusive of contingent (determined by conditions

or circumstances that follow) liability.

B. If the company is able to pay its debts as and when they are due. If the

answer to either comes in negative, then it is termed insolvent. This is

when the directors will contact insolvency personnel, who will confirm

insolvency and go through available options.

Creditors’ voluntary liquidation: Elaborated

It’s the joint decision by the directors of a company that triggers a

creditors’

liquidation. At this stage, a

company

is

insolvent and is held

unable

to

trading. It’s only the inside

voluntary

deemed

continue

members of the company who are allowed to take steps to put it into

Insolvency Accounting Firm and only the directors can time the decision.

However, direct influences like by failure to obtain an adequate financing

or the loss of a major customer also have a part to play.

The Insolvency Act 1986, under its wrongful trading provisions, imposes

potential personal liabilities on the directors who allow a company to

continue trading, even beyond the point of no return. In this case,

directors can be persuaded to take the required decision earlier, in case

there will be more funds available for paying the creditors.

A members’ meeting follows once it’s decided that liquidation should be

undertaken.


What is creditors voluntary liquidation

The directors will then instruct the insolvency personnel to arrange a

meeting of members and creditors (under section 98 of the Insolvency Act

1986) to pass the

resolution

of

placing

the

company

in

liquidation and for

nominating

a

liquidator, who takes control of protecting the company’s assets and

disposing of its perishable goods. The individual meetings are ideally

arranged on the same day; if not, then a two-week span is usually allowed.


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