The “Creditors Voluntary Liquidation” Solution

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Who needs a Creditors Voluntary Liquidation?

This is a procedure used for companies that find themselves unable to pay creditors as and when they fall due and the directors want to close the business and the company down.

The closing down of the company can be done via a Voluntary Administration as well so it is going to depend on the particular situation.

Creditors Voluntary Liquidation takes longer to initiate than Voluntary Administration but is generally cheaper. So if you as a director have time and are not under creditor pressure and wish to close down your company Creditors Voluntary Liquidation may be for you.

How would a Creditors Voluntary Liquidation help you?

To understand how this can help you is to understand the alternatives if you don’t wind up your company and you allow a creditor to take action.

To wait for a creditor to take action means you will encounter significant delays to concluding your financial problems and leaves you exposed to much creditor pressure and decidedly negative emotions on an ongoing basis. Take the initiative yourself and you experience closure of these unpleasant situations quickly.

To wait and let creditors take the initiative multiplies the distrust that already exists. The question always remains what did the directors do with the money? To take the initiative early shows creditors your integrity and desire to face your problems.

If you leave all the assets to a race between creditors, which is essentially what occurs if you leave it up to creditors, it will result in less funds available for all. To close the business down yourself in an orderly manner ensures there is more money to go round.

What you should do if you find yourself in difficulties

Collect what information you can about your financial position. Organise to meet with a specialist in the field to review your position and discuss your options.

On consulting with the specialist you should decide that Creditors Voluntary Liquidation is the best option to remove your financial troubles. These are the required steps to initiate the process.

  1. A meeting of directors will need to be convened to resolve that the company cannot pay its debts as and when they fall due and that the company should be placed into liquidation and to seek the assistance of a specialist. The Directors will also nominate one of their members to attend and address the creditors meeting.
  2. The specialist will help you compile the documents to convene a shareholders/members meeting as well as meetings of creditors, which must be held subsequent to the meeting of shareholders.The shareholder meeting is where the company is wound up.The creditors decide whether they want the members choice as a liquidator or their own nominee as well as whether they want a committee of inspection to liaise with the liquidator.
  3. The specialist will assist you to prepare a Report As To Affairs showing the company’s assets and liabilities, which must be tabled at the meeting of creditors. Also extracted from this document, which must be circulated to creditors with the notice of meeting, is a summary of affairs.
  4. Unless you can obtain the consent of 95% of all shareholders to short notice the meeting will need 21 days notice as the resolution to wind up the company is a special resolution.
  5. The director attending the meeting is ordinarily required to address the meeting as to how the company finds itself in the position it is in.
  6. There are the requirements of minutes to be produced and other documents for lodgement around the meetings.
  7. At the time the shareholders resolve that the company be placed into liquidation the control has passed from the directors to the liquidator. You must nominate a Registered Liquidator.
  8. In certain circumstances it is possible to pass control onto the proposed liquidator prior to the winding up.

Why Clout & Associates?

We are business recovery and insolvency specialists. This is the core business of our practice and there is vast experience within our ranks.

With our office located Coffs Harbour, we operate in your region and can be there for you when the problems arise. Go to the city firms and the personal nature of the business in the regions is forgotten let alone your own logistical problems in getting there not to mention the cost.

Our fees have been adjusted to cater for the size of business in the regions and the lower overhead structure we all operate under.

The reduced costs of you using us enable your creditors, which often includes you, to receive more.

To discuss your options click here for our contact details

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Morgan James Chubb

Chartered Accountant Registered and Official Liquidator Registered Trustee 38 years in Insolvency... Read more

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