PHILIP A BECK
Licensed Insolvency Practitioner
41 Kingston Street, Cambridge CB1 2NU
Tel: 0800 1953605 (Free call) or 01223 367022
Fax: 0844 5048737
All well and good if the amount of creditors' claims are less than the assets that can be realised within 12 months of the date of liquidation, the liquidator will pay the creditors leaving less money for the shareholders.
If not, though, then the liquidator will have to call a meeting of the creditors to convert the liquidation into an insolvent Creditors' Voluntary Liquidation, this gives the creditors the opportunity to appoint a different liquidator if they are dissatisfied with the shareholders' choice of liquidator.
Other than that the main procedural difference between a solvent and an insolvent liquidation is the requirement for the liquidator to investigate the reasons for the company's insolvency, and if necessary, compile a report concerning the conduct of the company's directors which is sent to the government's Insolvency Service.
When the company originally passed a resolution to wind up as a members' voluntary liquidation, the directors will have sworn a Declaration of Solvency stating that all the company's debts could be settled within 12 months of the proposed date of liquidation. The Liquidator in the subsequent insolvent liquidation would have to consider whether, in his view, the directors were negligent or reckless in swearing the Declaration. Upon receiving any Liquidator's report detailing unfit conduct the Insolvency Service may prosecute the directors under the Company Directors Disqualification Act 1986.
Philip Beck is a Chartered Accountant and Licensed Insolvency Practitioner operating since 1996 with substantial experience in undertaking liquidation, both solvent and insolvent.
Please note that this site deals only with company and tax law in the United Kingdom of Great Britain and Northern Ireland. It is not applicable to other jurisdictions.
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