Contract Law Essay

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Understanding Voluntary Liquidation For UK Companies Voluntary liquidation is a legal process that “winds up” an insolvent company by selling assets and property to repay debts. By the end of the voluntary liquidation process, the company will have stopped trading and will cease to exist. Liquidation is usually considered a last resort — similar to bankruptcy in cases of personal insolvency — and can have advantages, disadvantages and consequences for those involved. However, if your company is unable to pay its debts and other business recovery plans have failed, liquidation may be appropriate and, in such cases, it is important to seek the advice of a qualified solicitor or insolvency practitioner before taking this course of action. UK voluntary liquidation laws vary between countries. Remember that different laws apply in England and Wales, Scotland, and Northern Ireland, resulting in some differences in liquidation practices. How does voluntary liquidation differ from compulsory liquidation? Compulsory liquidation is enforced against a company as the result of a court order that follows a petition by a creditor, with an official receiver or insolvency practitioner appointed to wind up the company’s affairs. Voluntary liquidation, as the name suggests, is a similar process, but one entered into voluntarily. It can take two forms: * Members’ voluntary liquidation — sometimes referred to as “solvent liquidation”, this can occur when the majority of a company’s directors make a statutory declaration that the company is still solvent, which is when assets are sufficient to pay its debts, but the shareholders at a general meeting agree to wind up the company for other reasons. * Creditors’ voluntary liquidation — if the company can be shown to be insolvent or if the majority of directors do not make a statutory declaration of

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