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Directors should be aware that once an Insolvency Practitioner is appointed, they will have a responsibility to investigate the actions of company directors during the period preceding the liquidation.
Principally, the liquidator looks for clarification that, as soon as the director became aware of the insolvency he/she put the interests of creditors first.
Once insolvent, the directors must prove they have acted in the best interests of the creditors.
To avoid the threat of personal liability, it is important that directors act responsibly and take professional advice, immediately.
The process is usually instigated with a winding up petition and once it is heard at court, it can become a winding up order.
It involves the dissolution of the insolvent company and the redistribution of the company’s assets to the creditors.
If the limited company has liabilities that it cannot afford to pay and you would like to move on without the stress of the company’s debts hanging over your head, this type of business liquidation may be an appropriate option.
Although it should be seen as a last resort, liquidating a company via this route can be considered a rational decision and it may not necessarily mean the end of business.
A Member’s Voluntary Liquidation (MVL) is the appropriate way to liquidate a solvent UK company and can be used as part of an exit strategy.
An MVL may be considered if you have a solvent company that you want to close as part of your business plan and reduce taxation.