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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W hat is creditors’ voluntary
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
liquidation: This is when a
liquidation that can – after becoming solvent - can pay all its
creditors in full.
Creditors’ voluntary liquidation: This is when a company is
insolvent and is unable to pay fully to the creditors. Still, the
Compulsory liquidation: Company is dissolved by order of the
Court in case of insolvency, the action instigated usually by a
Corporate Insolvency: A brief note
The Insolvency Act 1986 S123 devises to check if a company is insolvent
through two tests.
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
liquidation. At this stage, a
insolvent and is held
trading. It’s only the inside
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
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
liquidation and for
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.