Liquidation Definition

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GLOSSARY

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What does Liquidation mean?

The process by which a company's assets are realised for the benefit of its creditors.

A liquidation may be compulsory, in which case it is initiated by an order of the court, or it may be voluntary, in which case it is instigated by the company itself. There are several powers which are only available in a compulsory winding up.

Insolvency

The process by which a company's assets are realised for the benefit of its creditors.

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Checklist—Making and administering a statutory declaration by video conference in insolvency proceedings

Checklist—Making and administering a statutory declaration by video conference in insolvency proceedings Background Statutory declarations are a necessary part of insolvency proceedings, most commonly where a company enters members’ voluntary liquidation (MVL) (see section 89 of the Insolvency Act 1986 (IA 1986)) and where a company enters administration by an out of court appointment (see the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, r 3.17). Section 20 of the Statutory Declarations Act 1835 (SDA 1835) prescribes the form of the statutory declaration to be given, as set out in the Schedule to SDA 1835. SDA 1835, s 19 states that a fee is payable and this is prescribed by the Commissioners for Oaths (Fees) Order 1993, SI 1993/2297. The fee is £5 for taking an affidavit, declaration or affirmation, and an additional £2 for each exhibit therein referred to and required to be marked or for each schedule required to be marked. Apart from the form of the statutory declaration and provision as to fees, no other...

Leasing or buying from an administrator (Scotland)—checklist

Leasing or buying from an administrator (Scotland)—checklist Title Administrator appointed by the court Where any administrator is appointed by the court under paragraph 11, Schedule B1 to the Insolvency Act 1986 (IA 1986), on the application of the company, its directors and/or any of one or more of its creditors, the title deeds should include certified copies of: • the administration order, and • any further order(s) under IA 1986, Sch B1, paras 91–95 for the appointment of any new administrator following the death, resignation or removal from office etc of the original or any subsequent administrator The Administrator is required to register a notice of appointment at: • Companies House, and • the Register of Inhibitions, in a form complying with the Insolvency (Scotland) (Company Voluntary Arrangements and Administration) Rules 2018, (ISCVAAR 2018), SI 2018/1082, r 3.27 Administrator appointed by holder(s) of qualifying charge, the company or its directors Where the administrator is appointed by the holder(s) of a qualifying floating charge (under IA 1986, Sch B1, para 14)...

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Corporate insolvency for dispute resolution practitioners: compulsory liquidation

This Practice Note contains a summary of the key points relating to compulsory liquidation from the perspective of a dispute resolution practitioner.What is compulsory liquidation?Compulsory liquidation is the process of winding up a company by the court, as distinct from a voluntary liquidation (both creditors’ voluntary liquidation (insolvent) and members’ voluntary liquidation (solvent)) which is commenced by a shareholders’ resolution.Compulsory liquidation is most frequently used by a company’s creditors, but it is also possible for others to wind companies up, such as the company itself or its members.For further reading on compulsory liquidation generally, see Practice Note: Liquidation—an introductory guide.The effect of compulsory liquidation on legal proceedingsExisting proceedingsThere is an automatic stay on existing legal proceedings against the company once a winding-up order has been made or a provisional liquidator appointed. This means that no action or proceedings can be commenced or continued against the company without the court's permission. Anyone wishing to lift this stay must apply to the court under section 130(2) of the Insolvency Act 1986 (IA...

Overseas companies in the UK—winding up, liquidation, insolvency and closure

When an overseas company opens an establishment which carries on business in the United Kingdom, it may have to register its particulars with Companies House. For details on registration requirements, see Practice Note: Overseas companies with an establishment in the UK.The regime for registration of an overseas company doing business in the UK is separate and distinct from the registration of overseas entities with an interest in UK property. For further details on the register of overseas entities that own UK property established by the Economic Crime (Transparency and Enforcement) Act 2022 (EC(TE)A 2022), see Practice Notes: Register of overseas entities that hold UK property—fundamentals and The beneficial ownership register of overseas entities that own UK property.This Practice Note summarises the requirements of an overseas company pursuant to the Companies Act 2006 (CA 2006) and the Overseas Companies Regulations 2009 (OC Regs 2009) in relation to its winding up, liquidation or other insolvency proceedings and the closure of its UK establishment.This Practice Note should be read in conjunction with Practice Notes:...

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Distribution agreement—non-exclusive—short form

Distribution agreement—non-exclusive—short form This Agreement is made on [date] Parties 1 [insert name of party] [of OR a company incorporated in England and Wales under number [insert registered number] whose registered office is at] [insert address] (Manufacturer); and 2 [insert name of party] [of OR a company incorporated in England and Wales under number [insert registered number] whose registered office is at] [insert address] (Distributor); each of the Manufacturer and the Distributor being a party and together they are the parties. Background (A) The Manufacturer manufactures [and supplies] the Products. (B) The Distributor has agreed to distribute the Products on a non-exclusive basis in the Territory in accordance with the provisions of this Agreement. The parties agree: 1 Definitions 1.1 In this Agreement: Active Sales • has the meaning given in Article 8(7) of VABEO; Affiliate • means any entity that directly or indirectly controls, is controlled by, or is in under common control with, another entity where “control” means the beneficial ownership of...

Facility letter (term loan): single company borrower—bilateral—unsecured

Facility letter (term loan): single company borrower—bilateral—unsecured [TO BE PRINTED ON THE HEADED PAPER OF THE LENDER] [insert name and address of borrower] [insert date] Dear [insert full name of borrower] We offer to place at your disposal a Sterling loan facility in the aggregate principal amount of £[insert amount in figures] ([insert amount in words] Sterling) [for the purpose of [insert details]] on the following terms and conditions: 1 Definitions 1.1 In this letter, unless otherwise provided: Base Rate • means the base rate of [the Lender OR [insert name of Bank]] for the time being and from time to time; Borrower • means [insert name of company], a company incorporated in England and Wales with registered number [insert company number] whose registered office is at [insert address]; Business Day • means a day, other than a Saturday, Sunday or public holiday, on which banks are open for business in London; Commitment Expiry Date • means the earlier of the date falling [insert number]...

Dive into our 79 Precedents related to Liquidation

Is it acceptable for a liquidator and the only creditor in an insolvency situation to be represented by the same solicitor? Or is this a conflict?

Is it acceptable for a liquidator and the only creditor in an insolvency situation to be represented by the same solicitor? Or is this a conflict? Both insolvency practitioners (IPs) and solicitors are members of professions that are governed by separate ethics codes. Both IPs and solicitors, before accepting an appointment or an instruction, should carry out documented procedures to ensure that there would not be a conflict of interest or breach of their ethics code in accepting the appointment or instruction. The question does not specify whether the conflict concerned would be for the solicitor or the IP and although both issues are considered, this answer deals primarily with the IP and whether the IP would have a conflict of interest. The insolvency ethics code sets out a framework approach that is to be followed in all cases to establish whether there is a conflict of interest. The IP should first of all assess whether there are any threats to the fundamental principles of integrity,...

Do the English property and assets of a dissolved overseas company pass to the Crown as bona vacantia?

Do the English property and assets of a dissolved overseas company pass to the Crown as bona vacantia? When a company registered in England and Wales is dissolved, all property and rights vested in or held on trust for it (including leasehold property) will be deemed bona vacantia (meaning ‘ownerless property’) at the date of dissolution and will vest in and belong to the Crown (or the Duchy of Lancaster or Duchy of Cornwall, as may be appropriate). The treatment of companies incorporated outside the UK (overseas companies) is dealt with in Part 34 of the Companies Act 2006 (CA 2006), which gives the Secretary of State power to make regulations to impose on overseas companies various registration, reporting and disclosure requirements. The two principal regulations dealing with overseas companies are: • the Overseas Companies Regulations 2009, SI 2009/1801 • the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009, SI 2009/1917, as amended by the Overseas Companies (Execution of Documents and Registration of...

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Supreme Court confirms that section 213 of the Insolvency Act 1986 is not restricted to those involved in the management or control of the company’s business (Bilta (UK) Ltd (in liquidation) and others v Tradition Financial Services Ltd; Nathanael Eurl Ltd (in liquidation) and another v Tradition Financial Services Ltd)

The Supreme Court unanimously dismissed both appeals. Applying ordinary principles of statutory interpretation, the court affirmed that the language of section 213 of the Insolvency Act 1986 (IA 1986) does not restrict liability to those involved in the management or control of the company’s business such as directors or managers, but could very well apply to someone routinely transacting with the company in the knowledge that the company was carrying on a fraudulent business. In addition, the court held that where claimant companies had been struck off and then later restored to the register, the deemed existence of the claimant companies during the period in which they were in fact in dissolution did not necessitate assuming that they lacked directors or other officers during that time. That was a question of probability to be determined on the evidence: the burden of proof was on the claimant companies and they had failed to discharge it. Accordingly, the dishonest assistance claim remained time-barred. Andrew Westwood KC, barrister practising from Maitland Chambers, comments...

Use of assenting class to facilitate cross class cramdown not abusive (Re Sino-Ocean Group Holding Ltd)

Restructuring & Insolvency analysis: Through this judgment, the court sanctioned a proposed restructuring plan (the ‘Plan’) under Part 26A of the Companies Act 2006 (CA 2006) relating to Sino-Ocean Group Holding Ltd (the ‘Plan Company’) despite (a) the Plan not being approved by over 75% in value of those voting at the meetings of two out of the four classes of creditors and (b) one of the dissenting creditors, Long Corridor Asset Management Ltd (‘Long Corridor’) appearing at the sanction hearing to oppose the Plan. The court sanctioned the Plan on the basis that: None of the members of the dissenting classes of creditors would be any worse off than they would in the event of the relevant alternative, which would be the Plan Company’s liquidation (thereby satisfying Condition A under CA 2006, s 901G (‘Condition A’)); the Plan was agreed by >75% in value of each of Classes A and C (ie two out of the four classes of creditors) (thereby satisfying Condition B under CA 2006, s 901G...

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