Liquidation Process

What is Voluntary Liquidation of a Limited Company?

What is Voluntary Liquidation of a Limited Company?

So what is voluntary liquidation of a limited company? To fully understand the process, first make sure your business is a limited company. A limited company or LTD is set up as a separate legal entity from your personal finances and consists of members who own shares in the company. All profits are owned by the business, and in most cases; all debt is owed by the business. An insolvent limited company can move to place itself into voluntary liquidation to avoid having creditors petition to force a court ordered liquidation. Voluntary liquidation allows for a more orderly process than a compulsory or court ordered liquidation. 

Voluntary Liquidation of a Limited Company – Steps to Take

Voluntary liquidation of a limited company can be done for the purpose of closing a business for reasons other than insolvency and is known as a members’ voluntary liquidation. A company’s owner may wish to retire or the business does not have a good long-term financial outlook and shareholders want to close the business before it becomes insolvent. Shareholders must pass a resolution to place the company into liquidation and even though court involvement is not required, a qualified liquidator must be appointed.

A creditors’ voluntary liquidation is the most common type of liquidation for an insolvent limited company.  A majority of shareholders must vote to adopt a resolution to voluntarily wind up the business.  In this case, it is the creditors who have the right to appoint the liquidator. Regardless of the type of company liquidation, assets are sold and the business is closed. The liquidator is in charge of the following:

  • To convene a meeting with creditors
  • Inventory, appraise, and market all company assets and properties.  (You may want to use a third-party asset recovery and disposition firm who has the expertise and resources to handle asset disposition to maximize value).
  • Put a stop to contracts with other companies and settle up with employees
  • Once assets are sold and liquidation costs are paid, appropriately distribute money to creditors.  If any funds are remaining, it goes to shareholders  

Now that you know more about what is voluntary liquidation of a limited company remember that the rules that govern the process can differ from jurisdiction to jurisdiction.  Before you start, consult with your solicitor or tax expert to get the best professional advice.    

Rabin is an international company that specializes in creating liquidity for complex manufacturing facilities with idle or marginally productive assets.  Rabin’s operations include selling entire plants, multiple plant locations, or surplus individual items by auction or liquidation and more. Past auctions include names such as Hostess, Braniff Airlines, Montgomery Ward, and the Railway Express Agency.  We invite you to contact us to learn more about what is voluntary liquidation of a limited company.

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What is Voluntary Liquidation of a Limited Company