Nobody relishes the prospect of liquidating the business that they’ve worked long and hard to build. Whether it’s financial struggles, or a well-deserved retirement we’re here to help demystify the liquidation process and allow you to make the right decisions for your company.

What is liquidation?

Liquidation is the process of winding-down a business and distributing a company’s assets when it is no longer able to pay its debts and function as intended. 

Types of liquidation

Creditors’ Voluntary Liquidation (CVL)

CVL happens when a company can no longer pay its debts as they fall due and is considered insolvent. In this case, a liquidator is appointed to close down the company, sell off its assets, and distribute any remaining funds to the creditors.

CVL usually happens when a company becomes insolvent. Here's how it typically works:

• The directors arrange a meeting with the shareholders, followed by a meeting with the creditors.
• At the creditors’ meeting, a Statement of Affairs is presented, outlining the company’s current financial position. Creditors can review this document and ask the directors questions about the company’s finances.
• The creditors then confirm the appointment of a liquidator, who takes over the process of winding up the company.

Members’ Voluntary Liquidation (MVL)

MVL is a formal process used to wind down a solvent company. In this case, the shareholders appoint a liquidator to handle the closure. The liquidator’s job is to sell off the company’s assets, settle any remaining liabilities, and then distribute the remaining funds or assets to the shareholders—either in cash or in kind.

Some key benefits of an MVL include:

1. The liquidator takes over from the directors, handling all responsibilities related to winding up the company.
2. It can be a very tax-efficient way to return value to shareholders.
3. There’s no need to bring all statutory filings up to date before starting the process.
4. It reduces ongoing costs such as audit, tax compliance, and accounting fees.
5. It helps avoid involuntary strike-off due to missed statutory filings.
6. There’s a limited two-year window after dissolution to reinstate the company or ICAV to the register, if needed.

Compulsory Liquidation

Compulsory Liquidation, also known as Court Liquidation, is a formal insolvency process where a company is forced to liquidate by a court order. This happens when a creditor, typically due to non-payment of debts, petitions the court to wind up the company, leading to the appointment of a liquidator to manage the company's assets and distribute them to creditors.

Compulsory liquidation is distinct from voluntary liquidation (CVL or MVL), where the company's directors initiate the liquidation process without court intervention.