All You Want to Know About Liquidation and Its Types

Liquidation can happen in any business. There are various types of it such as Creditors Voluntary Liquidation, Voluntary Liquidation, Official Liquidation, Members Voluntary Liquidation, Provisional Liquidation, and Court Liquidation.

Most of the company directors who do not have experience dealing with a company that faces this critical situation often do not comprehend the liquidation terms that advisers use. In this article, you will learn about different types of liquidation in detail.

What is Liquidation?

Liquidation is a legal method adopted by companies to wind up their registered company. Companies that are registered with the Australian Securities and Investment Commission are only eligible to liquidate themselves. To find companies who can liquidate, you need to find whether they have an ACN number.

These companies generally have “Pty Ltd” at the end of their name. The Insolvency Experts is a leading cost liquidation specialist based in Australia. The licensed professionals at this company have years of experience in dealing with company liquidation efficiently and successfully.

Different types of Liquidation

Liquidation can happen in various types. Some of them have been mentioned below as:

Voluntary Liquidation

A Voluntary Liquidation begins by resolution of the directors of the company and then its shareholders. How it takes place depends on the solvency of the firm. Where solvent firms need a Members Voluntary Liquidation and insolvent firms require a Creditors Voluntary Liquidation.

Members Voluntary Liquidation

It is another legal type of liquidation that helps in winding up a solvent firm. An MVL needs the company to pay all its debts and ensures that its tax lodgments are updated.

Creditors Voluntary Liquidation

If the company is not able to pay its debts on the due date and has declared it insolvent, then it requires a Creditors Voluntary Liquidation. A CVL is started by the stockholders of a firm.

Official Liquidation

Liquidation also takes place as a Court Liquidation.  In this case, the creditor of the firm files a legal petition to the court to force the insolvent company into liquidating itself. This is a lengthy process and can also prove to be expensive for the creditor.

The entire process involves that the creditor serves a “Statutory Demand” on the firm to pay an obligation to section 459E of the Corporations Act. If the firm is unable to pay the due debts as demanded in the Statutory Demand to the creditor, then it files a legal application to the Court to get the company to wind up.

Provisional Liquidation

This is an urgent case that involves the assets of the company. It is possible that the applicant can reach the Court and make a request to appoint a “Provisional Liquidator” for the protection of such assets.

So, in this way, in a Provisional Liquidation, the Liquidator protects the assets of the company, and examines its position, and then suggests the Court take an appropriate resolution measure.

Conclusion

Liquidation can happen in various ways. Depending on the present situation of the company, these can be different ways in which a company can get liquidated.

Leave a Reply

Your email address will not be published. Required fields are marked *