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Understanding Different Types of Business Liquidation

June 04, 2019

The liquidation of company assets can be a source of stress for all parties involved in the process. The most common question about liquidation processes are regarding the procedures a business must go through in order to liquidate assets – what is the best way to liquidate my company’s assets? Answering this question is not simple as there is not one set answer as to type of liquidation a business might opt for.Developing a strong understanding of your business’s needs will better inform your decisions within the liquidation process.


For those of you who are unsure of where to start – we’ll bring it back to basics by giving you an overview of the different liquidation types available.


Introduction: Compulsory Vs. Voluntary

  • The two types of liquidation are compulsory and voluntary – but there are also two types of voluntary liquidation
  • The two types of voluntary liquidation are member’s voluntary and creditors voluntary liquidation
  • Compulsory liquidation involves a court process whereas voluntary liquidation does not fulfil this requirement


Member’s Voluntary Liquidation (MVL)

  • No court involvement is involved in this process
  • It can begin when the company solvent has the capacity to pay outstanding debts and obligations


Creditor’s Voluntary Liquidation (CVL)

  • Unlike MVL, creditor’s voluntary liquidation of company is decided once the company is determined insolvent and not capable of paying off its debts
  • This process is initiated by the business’s directors and not the creditor party involved
  • CVL is often requested before a compulsory liquidation is to be petitioned by the court


Compulsory Liquidation

  • This procedure is initiated by the company’s creditors and involves a petition to the Court
  • This is usually the case because the creditors believe that the business is irreparably insolvent and unable to pay off its debts


Final Thoughts

The liquidation of a company can be a complex and intricate process. It is critical that directors opt for the services of qualified and experienced insolvency specialists. That way you can rest assured knowing that the decision to liquidate is the right one to make.

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