Businesses in the UK are certainly facing some very uncertain and challenging times at present, with close to 4,000 firms entering some form of liquidation every quarter. Despite these statistics it is still surprising however that many directors are not aware of the process involved in voluntary liquidation. There is also a lack of awareness of the ways in which they can gain support to begin fresh trading afterwards. This article therefore outlines some key milestones in the formal processes and the types of support available for the road ahead. It is initially important to understand the distinction between the two very different occasions on which companies might enter voluntary liquidation, explained here one after the other.

The Members Voluntary Liquidation:

This process is applied when the company members have themselves taken the decision to wind up the company affairs when it is then believed that the company is solvent. Some of the key milestones here are:

1. Company’s directors need to make a formal declaration of solvency within 5 weeks prior to the inception of the declaration to wind up.

2. They must make a statutory declaration which records that a full enquiry has been made into the company’s affairs. The enquiry should have found the company can settle its debts in full within 12 months of the start of winding up.

3. That declaration should include a statement of assets and liabilities at the time of the last practical reckoning.

4. The process is officially begun at a general meeting, where the members should pass a resolution to voluntarily wind up the company. (This process falls under the rules of the Companies Act 2006).

5. Notices of the resolution should then be sent directly to the Gazette within a 14 day period and to the Registrar within a 15 day period.

The Creditors Voluntary Liquidation:

This process is used in the opposite circumstances in the sense that it can sometimes be used when a company does not seem likely at all to manage to repay its debts. Some key milestones here are as follows:

1. The company needs to pass a special resolution (again, this requirement falls under the Companies Act 2006). In this instance, it is declared that the company cannot continue to trade due to its debts and therefore must be wound up.

2. Notices should again be posted directly into the Gazette within 14 days and also sent to the Registrar within 15 days.

3. Notices explaining where and when a Creditors Meeting is to be held should be sent to the company’s Creditors within 7 days, along with copies to the Registrar and 2 local newspapers.

4. This meeting should then take place within 14 days.

5. In a very similar manner to the process of the MLV, there needs to be a statement of affairs drawn up. In these circumstances however, that statement primarily serves to address the Liquidator’s and Creditors’ considerations.

6. The Creditors Meeting should then proceed within 7 days. One of the company directors will act as the Chair.

7. There is always a liquidator appointed, to whom it is vital that the directors lend their full co-operation.

About The Liquidator’s Role:
They are appointed primarily to take control of any and all assets, in order to distribute them among the creditors. In cases where some funds are still left over after this process, they will be distributed among the directors.

It is worth bearing mind that these two routes are not the only formal solutions available to solve problematic situations, for example, many companies are nowadays choosing to enter Company Voluntary Arrangements (CVAs). You should always seek advice from a business rescue service to fully understand all the options that may be open to you to solve your business difficulties. Another point to note is that quite naturally, a great number of directors are keen to begin trading afresh following either of these two processes. Business rescue services can provide invaluable assistance both during and afterwards by helping with company formation, fresh bank accounts, sourcing new accountancy support and other crucial forms of business guidance.

Author Bio: Jason N. Roth works with the Business Rescue Service, supporting UK companies before, during and after voluntary liquidation. The team have extensive experience of all the major legal business recovery options including CVAs and of course all the necessary requirements during liquidation itself.

Category: Business
Keywords: liquidation,voluntary liquidation