If the directors and/or shareholders decide that a business is no longer viable or in a position to continue trade, then they can decide to pass a resolution to place the company into a Creditors Voluntary Liquidation.
A creditors meeting is held following which an orderly realisation of available assets will occur. If sufficient funds are realised creditors’ claims are agreed and a distribution of the available funds will take place.
Voluntary Liquidation at the right time can protect the directors from personal claims such as fraudulent or wrongful trading.
There are advantages to placing a company into Voluntary Liquidation. Responsibility for dealing with creditors will pass to the Liquidator so as to bring to an end the stress of managing an insolvent company.
It ensures that the directors are complying with their fiduciary duties, reducing the risk of personal claims and possible directors disqualification.
Also with a Voluntary Liquidation the directors can in the first instance choose which Insolvency Practitioner is the Liquidator.
It is a requirement that the company cease to trade with the possibility that any goodwill is eroded or lost. All assets will need to be sold so in the event of a new start up any assets required will need to be purchased. In the event ot is found that the directors have acted improperly they may be subject to a ban and/or fine.