Creditors Voluntary Liquidation Creditors Voluntary Liquidations are the most common form of liquidation in the UK. Generally, the company is out of cash, cannot pay debts and the business is no longer perceived as viable. The directors of the insolvent company will call an EGM and will report that the company is insolvent and will advise the company should enter liquidation voluntarily. At the meeting, members will pass a resolution to crease trading and nominate a liquidator. The liquidator will prepare the statement of affairs and will call creditors to a meeting. An advertisement is placed in The London Gazette and local press and the liquidator will write to creditors to request a claim for their debts. The creditors then appoint the liquidator. The liquidator has four main tasks: To convert assets of the business into cash To adjudicate creditors’ claims To investigate and report on the conduct of directors To make payments to creditors in order of priority In some cases the liquidator is requested to sell the assets of the business to another party, including the former directors or shareholders. This is commonly known as a Phoenix. Phoenixism is legal provided that the rules are observed and the liquidator maximises the interests of creditors before selling to the third party. REMEMBER: Former directors entering into a Phoenix will require investment to trade the new company. Borrowing might well be extremely difficult. Previous page