Types of Company Liquidation


Company liquidation refers to the process whereby a company goes through dissolution. Assets of the business are sold and payments made to creditors. Many times if the company makes profits, it will not go through this process. But in some cases, even solvent may have to choose to go the route.

There are two main types of company liquidation. The first one is voluntary liquidation where the decision is taken by the directors or shareholders to carry out the dissolution. If the board members make this choice, they will have to get most votes before the proceeding. If the shareholders want to this way, they also will have to do this before taking action.

Voluntary liquidation


It is important to keep in mind that this type of company liquidation may be MVL or CVL if a given company is insolvent. Members voluntary liquidation can be carried to allow for termination of the company in an orderly manner. This can be done if the shareholders of the business feel the directors are not taking the action which are against their interests. For instance, services and products of a business may not be attracting the potential customers. Voluntary liquidation is considered the best solution. In this type, you do not involve the court. The creditors get paid off fully by selling the assets of the company.

Compulsory liquidation

The other type of liquidation is the compulsory type whereby the process if started by creditors. The reason for this may be that a given company fails to pay its creditors. What happens then is that the creditors go to court and get a court order to get such a company dissolved. The cost of court matters is often born by the creditors. But after the process is completed, they are the first to get paid.

Creditors who want company liquidation go to court to get the assets of a business sold. This happens when they feel the directors of the company are not cooperative as far as debt paying is concerned. In most cases, the company may not be forced to liquidate since the directors pay off debts due for fear of losing the company.

Provisional liquidation

provisionalliquidationThis is another company liquidation type whose purpose is to preserve company assets which may be at risk. In this case, a good liquidator is appointed to protect the business’ financial position. On the other hand, the petition liquidation is considered by the court.

These are some of the ways company liquidation can be done. This can help a business know what to do as far as liquidation is concerned.

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