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A court liquidation usually occurs as the result of a creditor taking action to recover their unpaid debt by making an application to court to wind up the company.

In order to obtain a court order to wind up a company, a creditor must have a valid debt and be able to demonstrate to the court that the company in question is insolvent. If the court is satisfied the company is insolvent and should be wound up, it will make a winding up order placing the company into liquidation and will appoint a registered liquidator (usually a liquidator nominated by the creditor).

As the name implies, a creditors’ voluntary liquidation is a voluntary liquidation although despite the name, it is an appointment made by the company’s directors and shareholders.

A company is considered insolvent if it is unable to pay its debts as and when they fall due. When a company is insolvent, its directors have an obligation to take appropriate action or they run the risk of being exposed to an insolvent trading claim by a liquidator if the company is subsequently wound up. If the directors are unable to deal with the company’s potential insolvency by actions such as increasing revenue or cutting costs, selling assets or raising additional funds, they can voluntarily appoint a liquidator to wind up the company.

A VA is an appointment made by the company’s directors when a company is or is about to become insolvent.

A company is considered insolvent if it is unable to pay its debts as and when they fall due. When a company is insolvent, its directors have an obligation to take appropriate action or they run the risk of being exposed to an insolvent trading claim by a liquidator if the company is subsequently wound up. If the directors are unable to deal with the company’s potential insolvency by actions such as increasing revenue or cutting costs, selling assets or raising additional funds, they can voluntarily appoint either an administrator or a liquidator to deal with the company’s insolvency.

When your company is facing insolvency and is unable to pay its debts as and when they fall due, one of the available options is a VA. The VA process allows directors to appoint an administrator to their company and present a proposal to the company’s creditors.

If the majority of creditors (in both value and number) vote in favour of the directors’ proposal, the proposal is accepted and the company avoids liquidation. A Deed of Company Arrangement (DOCA) is then signed by the company, its directors and the administrator. In most cases, the administrator is appointed as deed administrator to oversee the DOCA.

A receivership is an appointment made by a secured creditor seeking repayment of their outstanding debt.

If your company has not been repaying secured debt owed to a creditor such as a bank or a finance company, the appointment of a receiver is a possibility. A secured creditor holding a ‘registered security interest” over your company’s assets has the right to take this route to seek repayment of their outstanding debt if you have defaulted on repayments: (A registered security interest may be held over property such as land and plant & equipment or over assets such as book debts, cash and stock.)