Advice on the Right Way to Deal with Liquidation


There are many reasons for a firm to go bankrupt and liquidate its assets. But in all cases of bankruptcy, liquidation is mostly the only way out of the tight situation. Especially so in case the person filing for bankruptcy is moving on to a new location. The selling of goods and other assets will be cheaper than relocating them.

What is liquidation?

When a firm or an enterprise goes bankrupt or is terminated, the selling of its assets and paying the amount received to the creditors is called liquidation. The money that is left is distributed among the shareholders. In a majority of cases, the creditors try to liquidate in such a way that they get maximum money out of it. Preferred shareholders get priority in having the remaining money than the common shareholders.

Types of Liquidations

When you want to liquidate your company, there are two major types of liquidation you can resort to.

1. Creditors voluntary liquidation (CVL) – This is a category wherein the liquidation is chosen unanimously by you and the shareholders of your company due to the inability to pay off the debts owed. When agreed to unanimously, the company will stop operating and wound up.

2. Members’ voluntary liquidation (MVL) – Though your company is able to pay off the debts, you still want to close the company.

Process of Winding Up

To wind up the company officially, you need to arrange for a shareholders’ meeting. The shareholders should vote a minimum of 75% in favor of the resolution for wrapping up. In case the resolution is successful, you should take care of the following.

  • Assign the authority over to an insolvency practitioner to act as liquidator and execute the liquidation
  • A written resolution should be sent within 15 days to the regulatory body
  • The liquidation should be announced formally
  • The responsibilities held by you as director of the company will be altered

Role of Liquidator
Once you handover the liquidation process to the liquidator, the control of the business will be taken over from the board of directors by the liquidator. Any outstanding contracts or legal disputes will be dealt with by them. The assets of the company will be sold off and the money received as a result would be paid to the creditors.

The liquidator company also oversees the paperwork and meets the deadlines correctly and informs authorities on the proceedings. The job of meeting the creditors and negotiating with them for a settlement also falls on the liquidator. Filing a report on why the business had failed and removing the company from the Register of Companies is also taken care of by the liquidator.

Choosing a Liquidator

To ensure that the process of liquidation goes well, you need to choose the right liquidator. The three key factors you should look into include the experience of the liquidator, the areas they specialize in, and the fees they charge for the services they render. You can always search online for the best liquidator available.

Liquidation is a process that needs to be done with care or you may end up in a direr situation than you started with. Ensuring that you know about the entire procedure will help in dealing with it appropriately.

Author Box:

James Patrick teaches you the precise method of dealing with the process of liquidation. Though he recommends creditors voluntary liquidation as his favorite, he insists you getting a better understanding about the procedure involved.

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James is a financial expert who has contributed several business and finance related articles. His expertise and first-hand knowledge of economics makes his blogs and articles informative and helpful for those looking out for guidance and assistance in matters related to finance. He has an active schedule of TV and radio interviews He is co-host of the popular VT Radio show Jim and Gordie Show. latest-articles-buttonJim comes from an old military family dating back to the American Revolution. Dozens of Confederate ancestors fought for the South in the War Between the States. Uncles fought in WWII and Korea. His father was a WWII P-40 and later P-51 Mustang fighter pilot. Vietnam found several uncles serving, a cousin, and brother Wendell as a young Ranger officer. His mother was a WWII widow at 16, her first husband killed with all 580 aboard when the SS Paul Hamilton, an ammunition ship with 7000 tons of explosives aboard, was torpedoed off the coast of Algiers. He has been writing, speaking and doing public relations, television, consulting and now multimedia work for a variety of American heritage, historical, military, veterans and Intel platforms. Jim’s only film appearance was in the PBS Looking for Lincoln documentary with Prof. Henry Lewis Gates, and he has guest lectured at the Army Command and General Staff School at Fort Gordon. Currently he is working to take his extensive historical video archives on line to assist his affiliated organizations with their website multimedia efforts, such as the Military Order of World Wars, Atlanta, Sons of the American Revolution, Sons of Confederate Veterans , Assoc. for Intelligence Officers, the Navy League, Georgia Heritage Council, National Memorial Assoc.of Georgia.

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