An IP’s role as liquidator in a Creditors’ Voluntary Liquidation (CVL)
When appointed to conduct a Creditors’ Voluntary Liquidation (CVL) the insolvency practitioner works on behalf of the company’s creditors. A company is placed into insolvent liquidation because it cannot afford to repay its debts to various stakeholders – typically customers, suppliers, HMRC, and employees.
Securing a return for creditors
The appointed insolvency practitioner must ensure that creditors receive as high a return as possible from the liquidation. They do so by processing creditor claims, valuing and selling business assets, and then distributing the proceeds according to the statutory creditor hierarchy to repay company debts as far as possible during the liquidation process.
Winding up the business’s affairs
This involves overseeing financial and administrative requirements, such as closing down the payroll, processing redundancy claims, and submitting a strike-off request to Companies House.
Investigating the reason for insolvency
The IP’s role as investigator in a CVL entails identifying the reasons behind the company’s failure and looking for instances where director misconduct or negligence may have contributed to its downfall.
Insolvency practitioners and compulsory liquidation
The process of compulsory liquidation, and an insolvency practitioner’s role in it, is similar to Creditors’ Voluntary Liquidation but the appointment is typically made by the courts. Compulsory liquidation occurs when a company creditor successfully petitions to have a business forcibly wound up.
In a compulsory liquidation process, an Official Receiver may be appointed initially by the courts to oversee the liquidation. You must comply and co-operate fully with the Official Receiver. Depending on the complexity of the liquidation, the Official Receiver may pass the case out to an insolvency practitioner who will continue with the liquidation and company closure process. An insolvency practitioner’s role isn’t just related to the closure of insolvent companies, however.
Don’t Fall Foul of Unqualified AdviceThe role of liquidator in a Members’ Voluntary Liquidation
Members’ Voluntary Liquidation is a process that closes down a solvent company, and again, must be conducted by a licensed IP. Their responsibilities in this instance are to the company’s members rather than the creditors, as the creditors will be able to receive all the monies that are owed to them.
The insolvency practitioner arranges and oversees the distribution of assets among members, or when appropriate, their sale and distribution of the proceeds. There’s no need for an investigation in this case as the company being closed down is financially sound.
Professional guidance at any stage
The insolvency practitioner as liquidator has an integral role when a company is closed down. This is true whether the business is solvent or insolvent. They can also make a significant difference to the outcome for companies heading towards insolvency, however, and this isn’t commonly known.
Their professional advice and guidance is invaluable to companies at any stage and given the potential repercussions for directors who don’t close down their business in the correct manner, it’s always advisable to seek assistance from a licensed IP.
Company Closure has extensive experience in helping directors to close their company according to the legal requirements of their circumstances. Please get in touch to find out more about how we can help, and to arrange a free, same-day consultation.
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