Liquidation is the process of winding up a company’s financial affairs. It provides for an orderly dismantling of the company’s structure, the undertaking of appropriate investigations and the fair distribution of the company’s assets to its creditors. This occurs either because the company can’t pay all of its debts (i.e. it is insolvent), or its members want to end the company’s existence.
Insolvent businesses with cash flow problems, mounting unpaid statutory liabilities (Tax, Super) and other creditor build up, indefensible legal actions.
When there is no hope of turning around the business of the company, there are claims from creditors that are un-payable, where there has been a significant change to the business that will impact is ongoing profitability (Death, insurance claim, loss of key personnel, loss of key clients, other unforeseen circumstances).
A voluntary liquidation is a liquidation commenced by a resolution of its members that it is unable to pay its debts as and when they fall due and that an external Liquidator is needed to fully wind up the affairs of the company.
The Liquidator’s role is to:
Stops creditors from continuing to press for the payment of unpaid debts incurred by the company. If commenced quickly enough, protects the directors of the company from possible personal liability for the company’s debts. Stays all legal action brought against the company. Fully winds up the affairs of the company.
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