Winding-Up Company Procedures

Receivership

• This is where the debenture holder or charge holder (usually a bank) appoint a receiver to assess the worth of the company and restructure, possibly selling all or part of the company in order to recoup its investment.
• The receiver's aim is to recover the value of the lenders security, and for this purpose the receiver has the power to carry on the companies trade and realise its assets.
• The receiver acts invariably as the agent of the company unless or until it goes into liquidation. The receiver will often seek an indemnity from the bank.

Liquidation

Where the core business is unprofitable, and there is no hope of a trading solution, liquidation is the likely result. There are three types of liquidation.

1. Creditors voluntary liquidation - when the company makes the decision
   • The directors call meetings of the members and creditors of the company in order to appoint a liquidator
   • The members appoint a liquidator but this has to be ratified by the creditors
   • The creditors have power to appoint an alternative liquidator
   • The role of the liquidator is to realise the assets of the company and to distribute them to the creditors in order of priority and return any surplus to the shareholders
2. Compulsory liquidation - when the company is wound up by a creditor
   • A creditor who is owed £750 or more can instigate this form of winding up
   • The creditor presents to the court a winding up petition against the company
   • The company, its directors and shareholders may also present a winding up petition
   • Initially the official receiver is appointed as liquidator but a licenced insolvency practitioner may be appointed in due course
3. Members voluntary liquidation- when the company can pay its debts in full - this only applies to a solvent company
   • This process is normally instigated because of a need to restructure or cessation of trade
   • In this type of liquidation the directors of the company swear a affidavit that the company can pay its debts in full within twelve months
   • A licenced insolvency practitioner is appointed to carry out this task

More Information:

Rescue procedures to enable the company's survival