For a company to decide which type of voluntary liquidation is appropriate, the company directors must first review their current financial situation and look at the reasons as to why the company is failing. If there is a chance that the company can be saved, then a financial advisor may be able to suggest an alternative procedure.
If a company director owns a family business and wishes to retire but there are no family members to pass the business onto then a decision may be made for the company to enter a Members Voluntary Liquidation (MVL). This procedure is also ideal if the company is solvent. Before making a declaration that the company is solvent, company directors must be sure that they are able to pay off any debts, otherwise they could face penalties.
If a company is insolvent, then a decision may be reached to enter a Creditors Voluntary Liquidation (CVL). During this process, company directors will lose control of their company to a liquidator, who along with creditors will investigate the company and question directors as to why the company has failed. This process may be difficult for some companies, but will allow the liquidator to take control of the company’s assets and ensure that creditors are paid. Read more