In times of financial difficulties

Corporate Recovery and Insolvency terminology

Insolvent Liquidations

If a company is insolvent, the directors have a legal duty to do everything possible to protect the interests of the creditors. Ultimately, this may mean calling a meeting of shareholders to put the company into liquidation and appoint a liquidator, and a meeting of creditors to ratify the appointment of a liquidator. This procedure is known as a Creditors Voluntary Liquidation (“CVL”).

If creditors are owed over £750 and it can be proved that the company is unable to pay its debts, they may petition the Court for the company to be placed in liquidation, i.e. for a winding up order to be made by the Court. When the company is in Compulsory Liquidation, i.e. is wound up by the Court, the Official Receiver, a member of the DTI’s Insolvency Service, is initially appointed liquidator. An independent Insolvency Practitioner, such as a CBW partner, can then replace the OR as liquidator if the creditors so wish.