What Is A Compulsory Liquidation?
A compulsory liquidation (also called a compulsory winding-up) is a company liquidation ordered by the court. This is usually on the petition of a creditor, the company, director(s) or shareholder(s). A winding-up petition may also be presented by the Secretary of State for Trade and Industry on the grounds of public interest.
The court initially refers the case to the Official Receiver, who is a civil servant and an officer of the court. If the assets are likely to cover the administrative costs, the Official Receiver calls a creditors’ meeting to appoint a liquidator other than him or herself, otherwise he or she will remain in office. In some cases the Department of Trade and Industry may use its power to appoint a liquidator as soon as the winding-up order is made. Major creditors can influence the appointment of the Liquidator.
Creditor's Voluntary Liquidation (CVL)
A CVL is a liquidation begun by shareholder resolution, but is controlled by the creditors who can appoint a liquidator of their choice. The liquidator must be a Licensed Insolvency Practitioner. Dodd & Co have two licensed insolvency practitioners, and .
Members' Voluntary Liquidation (MVL)
A MVL is the procedure for winding up a company which is solvent. It is so called because the liquidation remains under shareholder control. Reasons for winding up a solvent company include:
- providing an exit route for private company
shareholders to enable them to realise their investment
- where a company is dormant or its purposes have
been fulfilled as part of a reorganisation scheme.
The procedure requires a statutory declaration of solvency by the company directors. The liquidation commences with a shareholder resolution. Although the MVL procedure is only available for solvent companies, the law requires that the liquidator is a Licensed Insolvency Practitioner.