Understanding the different types of liquidation

Quick Summary

  • There are 3 types of liquidation
  • 1. Creditors' Voluntary Liquidation - for companies with debts
  • 2. Members' Voluntary Liquidation - for companies with no debts
  • 3. Compulsory Liquidation - winding-up order issued by a court

There are three different types of Liquidation.

A Creditors' Voluntary Liquidation ("CVL")

A Creditors' Voluntary Liquidation ("CVL") is an insolvent Liquidation, meaning a company is unable to pay its debts i.e. is considered insolvent.

A Members' Voluntary Liquidation ("MVL")

A Members' Voluntary Liquidation ("MVL") is a solvent Liquidation, meaning a company is able to pay its debts in full, together with interest. This procedure is usually used when the shareholders of a company wish to retire, realise their investment or where the company is surplus to requirements.

Compulsory Liquidation

Finally, a court can make a winding-up order on the petition of an unpaid creditor or the company itself, its director or shareholders. This is known as compulsory Liquidation. As this is a court process, you will not be able to use Liquidations Online to commence a compulsory Liquidation. However, if you have received a threat of a petition or a petition itself, we may be able to help you if contact is made at an early stage.

If you plan on liquidating a company via an MVL or CVL, you must appoint a insolvency practitioner to act as the 'liquidator'. We are here to help to you need to discuss your company's situation.