Liquidation Solicitors Glasgow, Edinburgh, Inverness & Aberdeen, Scotland
Liquidating, or winding-up, a company means its assets are used to pay its debts. There are three types of liquidation: members’ voluntary liquidation (MVL), creditors’ voluntary liquidation (CVL) and compulsory, or court, liquidation as it is known in Scotland. A liquidator is an authorised insolvency practitioner who runs the liquidation process. The duty of a liquidator is to wind up the company’s affairs. This is achieved by liquidating all the company’s assets and distributing the proceeds to the company’s creditors. If there is any surplus, the liquidator would distribute this to members of the company. At the end of the process, the company is dissolved.
Whatever the size of the business, whether you are the director of a company or a creditor, Complete Clarity solicitors have the experience and expertise to help.
The distinction between an MVL and a CVL is that with MVL the directors have to make a statutory declaration of solvency. This declaration states that the company will be able to pay off its debts in full within 12 months from the start of the liquidation.
In a CVL, there is no such declaration. It is a process designed to allow an insolvent company to close voluntarily. The company passes a special resolution to say it cannot continue in business and it is advisable to wind it up.
Once appointed, the liquidator acts in the interests of the creditors, not the directors.
A compulsory liquidation is a court-based procedure through which the assets of a company are realised to satisfy the company’s debts and liabilities as far as possible.
If a company is unable to pay its debts, a creditor may petition the court for it to be liquidated. In Scotland, this process is known as court liquidation. If an order is granted, a licensed insolvency practitioner is appointed as interim liquidator. Creditors can choose a different liquidator at the creditors’ meeting or agree the continuation of the interim liquidator.
Implications for Directors and Creditors
With any liquidation, the news of the company entering the liquidation process would be publicised in the Edinburgh Gazette by way of alerting all creditors.
Once a liquidator is appointed, the company directors no longer have control of the company or its assets. They cannot act for the company and must cooperate with the liquidator.
Creditors with security over the company’s assets are entitled to be paid first and receive the proceeds of the sale of those assets. In insolvent liquidations, the unsecured creditors will receive only some or none of the debts due to them.
Contact our Liquidation Lawyers Glasgow, Edinburgh, Inverness & Aberdeen, Scotland
Based in Glasgow, Shawlands, East Kilbride and Edinburgh, we provide clear, practical and impartial legal advice to businesses across Scotland. If you are a business needing help in this area, please get in touch to arrange an initial consultation with one of our liquidation solicitors. Call us today on 0808 273 6766 or complete our online form.