Liquidation

It may be evident that the best option available to the client is the insolvency route in order to protect their interests and the interests of their creditors.  In our experience, the most difficult decision an owner director has to make is to decide to wind up their company. They will probably have worked hard for many years to build up the business and they will have a natural reluctance to closure for the following reasons:-

• Sentimental Attachment
• Staff Loyalty
• Customer Loyalty
• Unattainable Expectations that a turnaround can be achieved
• Personal Pride

In these cases our function is to communicate with the client that it is in their own best interests to proceed with an early and orderly wind up. 

This can be achieved by the following:-

• Challenging their reasoning outlined above
• Providing clear information in relation to the outcome and the personal financial advantages of liquidation
• Explaining the mechanism of the process involved
• Providing examples of other cases which have proceeded to liquidation
• Providing advice in relation to minimising their personal exposure
• Providing ongoing advice and consultancy where required throughout the process

Stephens Cooke & Associates believes that a client who willingly participates in a liquidation is of significantly higher value to their bankers than a client who is ultimately forced into liquidation.

The three main liquidation options are:

1. Creditors voluntary liquidation

A creditors voluntary liquidation is the most commonly used procedure for dealing with an insolvent company.  In summary, the directors "voluntarily" place the company into liquidation.  The company is initially placed into liquidation by the shareholders passing the appropriate resolution.  At the subsequent creditors meeting the creditors are provided with an opportunity to appoint to appoint their choice of liquidator.

2. Court liquidation

A court liquidation occurs when a petitioner petitions the High Court to appoint a liquidator.  It is generally used by creditors of a company seeking payment of monies due to them.  However, the process may also be used by disgruntled shareholders etc.  A court liquidation may be referred to as an "official liquidation" or a "compulsory liquidation" (i.e. the company is compelled to go into liquidation by a petitioner).

3. Members voluntary liquidation

A members voluntary liquidation is the procedure used to deal with solvent companies.  Under this type of liquidation, all creditors are paid in full, and the surplus is returned to the shareholders.