If you have become bankrupt, then you need to close your business to pay the debts. But, if you are not able to pay your debts, then you must hire liquidators to sell your assets and pay your debts.
On the other part, liquidators can be appointed by a manufacturing company to clear their old stocks and liquidators can sell such stocks in an auction to recover the amount.
Voluntary liquidation is a process that you can take, and you can conduct a meeting with your partners and stakeholders to start the liquidation process. But it is hard to close a dream project which you have started years ago.
If you face a huge loss and cannot pay your debts to the creditors, then the court can put your business in a compulsory liquidation process. In this case, the liquidator will be appointed by the court itself.
Power of a Liquidator:
A liquidator has huge power and he or she can sell your company’s assets to recover the debts. Once you appoint a liquidator, he will evaluate your business assets and debts, and he will start the liquidation process to sell your assets.
He will take full control of your business, and he will settle all the claims done by your creditors. However, if you have taken some loans in your name with a personal guaranty, then the liquidator will not be able to settle such claims by selling your company assets.
Apart from that, professional liquidators are bound to complete the necessary paperwork and meet the deadlines, and he or they will conduct some interviews with the company’s directors and the press releases stating the reasons for liquidation. Once the liquidation is done, liquidators will remove the company name from the public register.
Why Would You Appoint Liquidators?
Hiring liquidators can help you to close your business by settling the amount claimed by your creditors. They will sell your business assets to recover your debts and pay to the creditors accordingly.
Along with that, they can also give a small return to the directors and stakeholders of your company at the end of the liquidation. There are two types of liquidation processes; those are CVL or creditor’s voluntary liquidation and member’s voluntary liquidation or MVL.
Here, You Can Find The Details:
- CVL is a liquidation process where you can appoint a liquidator. In this case, they are appointed by the company’s directors. Directors and stakeholders can conduct a meeting with the liquidators to sign a licensed insolvency practitioner. Here, no court and official receiver is involved.
- MVL is also a liquidation process where an appropriate resolution is passed through a general meeting and directors can appoint a liquidation to shut down their company and sell their assets to pay their debts.
Both the processes are straightforward where the court cannot take any action during your liquidation. However, if you do not take such a voluntary liquidation decision and appoint an official liquidator, the court can appoint the same on a request raised by your creditors.
Liquidators and receivers are different, and you need to know their differences before you appoint a liquidator. Liquidators are appointed by the directors, and they will work under the company’s directors to recover their debts.
On the other hand, receivers are appointed by the court, and they will report to the court only. If a creditor lodges a complaint against your company in a court, then the court can appoint a receiver to start the liquidation process of your business, and it is known as compulsory liquidation.
Therefore, if you think that you cannot run your business and pay your creditors then it is better to go for the voluntary liquidation.