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The Different Types of Company Liquidation

February 04, 2020

The liquidation of company assets can be a stressful ordeal for both its directors and creditors. The most common questions regarding business liquidation typically pertain to what the process and procedures are that a company has to go through. However, the answer to this first depends on what type of liquidation a company will take. Is it compulsory or voluntary, and is the company solvent? Knowing these things is a very important first step to understanding the liquidation process as it will be handled differently depending on the type of liquidation.


Today’s blog will provide an overview of the different types of liquidation:


While there are two types of liquidation of company assets, compulsory and voluntary, there are also two types of voluntary liquidation – the members’ voluntary liquidation and creditors’ voluntary liquidation. The major difference between compulsory and voluntary liquidation is that compulsory liquidation involves a court process.


Members’ voluntary liquidation

Again, there is no court involvement in this kind of liquidation. It can begin when the company is solvent and has the capacity to pay its outstanding debts and obligations.


Creditors’ voluntary liquidation

A creditors’ voluntary liquidation is invoked only if the company is insolvent and not capable of paying its debts. Despite the name, it is a procedure initiated by the company’s directors and not the creditors. It is often requested before a compulsory liquidation can be petitioned by the Court.


Compulsory liquidation

This procedure is initiated by the company’s creditors involving a petition to the Court because they believe that the company is irreparably insolvent and may not able to pay its debts.


In summary, the liquidation of a company is a complex process and as such it is critical that companies get all the help they can get from qualified insolvency specialists such as Infinity Asset Solutions, who can help you make the right decisions regarding liquidation.


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