How to Liquidate a Company

Need Liquidation Advice - Click hereCompany liquidation is the process whereby the value of the assets are realised to pay down company debts. Depending on the state of the company the process of liquidation may result in a surplus of funds being returned to it’s members. However when the value of the assets are insufficient to meet debts as they fall due the company is said to be insolvent.

How to liquidate a company therefore depends on which of the above scenarios are relevant. There are two principal types of liquidation – voluntary liquidation and involuntary liquidation.

Voluntary Liquidation

There are two types of voluntary liquidation, which can be summarised as follows:

Members Voluntary Liquidation – a MVL is initiated by the members of the company where they have determined the company is able to meet it’s debts – i.e. the company is solvent. A liquidator is appointed to realise the value of the assets and pay down any debts. Any surplus is returned to the members to be distributed accordingly.

Creditors Voluntary Liquidation – a CVL applies when a company is unable to pay it’s debts as they fall due – i.e. the company is insolvent. A liquidator is appointed to realise the value of the assets and distribute accordingly to creditors.

Involuntary Liquidation or Compulsory Liquidation is when the courts order the liquidation of a company. This can be for a variety of reasons and is relatively rare. Involuntary liquidation can be initiated by the members themselves or their creditors. A liquidator is appointed with the same role and powers as that of a liquidator in a voluntary liquidation.

In the case of a voluntary liquidation the liquidator is an agent of the company while in an involuntary liquidation the liquidator is also an officer of the court with a duty of responsibility.

Deciding how to liquidate a company is often straightforward but seeking professional advice and consulting with experienced liquidators in Ireland is recommended.

Once you’ve decided how to liquidate a company, the primary role of the liquidator is to:

  • Inquire in to the company’s affairs
  • Realise it’s assets
  • Pay it’s debts
  • Distribute any surplus to the members in accordance with their respective entitlements

In cases where the company is insolvent and realised assets are unable to meet creditors in full, the assets are distributed in priority:

  1. Costs and expenses of the liquidation
  2. Preferential creditors
  3. Floating charges
  4. Unsecured creditors
  5. Members of the company

You should also note that a secured creditor holding a fixed charge or mortgage is entitled to realise the security outside of the liquidation.

Need Liquidation Advice - Click hereThe above information is for guidance only and is not comprehensive. Liquidating a company requires expert knowledge and that’s where we can help. Please call in confidence to discuss your needs on 1890 256733 or contact us here or just fill up the “Call Back” form, we will call back to you.