Liquidators can be accountants, lawyers, or business executives, depending on the case and legal requirements. Generally speaking, they are assigned by the court, by unsecured creditors, or by the company’s shareholders and have a fiduciary and legal responsibility to all involved parties, including the company being liquidated, the court, and any creditors. Until the assets of the company are sold and debts are paid off, the liquidator must make sure the liquidation process runs smoothly from start to finish. In the UK, the main types of insolvency proceedings that include a liquidator are the following:
- Voluntary liquidation: This self-imposed dissolution of a company is one that is approved by shareholders and the board of directors when they decide that the company no longer has any reason to remain operational or has no viable future. A liquidator is thereafter appointed to close the company in a professional manner. There are two types of voluntary liquidation in the UK – the members and the creditors’ voluntary liquidation. The former does not require the involvement of courts because the company is able to settle its debt. A creditors’ voluntary liquidation is initiated by directors where a company cannot pay its debts.
- Compulsory liquidation: This is when a company is forced to stop operating because it cannot pay its debts and a winding up order is issued by the court. The liquidator’s role is to investigate why the company failed and to deal with its assets and liabilities.
Companies can also be dissolved without begin liquidated. This may apply to companies that are no longer operating. Insolvency in the UK is set out in theInsolvency Act of 1986.
Once the liquidator has been assigned, the next step is that they take control of the organisation’s assets. Throughout the process, the liquidator is considered the “go-to” person who assesses the company’s assets, distributes them accordingly, and manages meetings between the company and its creditors.
One of the main differences in the UK is that only individuals but not companies can file for bankruptcy, including sole traders and partnerships. For LLC, the process is called liquidation.