Liquidating business definition
The liquidator may also have to determine whether any payments made by the company or transactions entered into may be voidable as a transaction at an undervalue or an unfair preference.The main purpose of a liquidation where the company is insolvent is to collect its assets, determine the outstanding claims against the company, and satisfy those claims in the manner and order prescribed by law.The liquidator will normally have a duty to ascertain whether any misconduct has been conducted by those in control of the company which has caused prejudice to the general body of creditors.In some legal systems, in appropriate cases, the liquidator may be able to bring an action against errant directors or shadow directors for either wrongful trading or fraudulent trading.Voluntary liquidation begins when the company passes the resolution, and the company will generally cease to carry on business at that time (if it has not done so already).A creditors’ voluntary liquidation (CVL) is a process designed to allow an insolvent company to close voluntarily.In most legal systems, only fixed security takes precedence over all claims; security by way of floating charge may be postponed to the preferential creditors.Claimants with non-monetary claims against the company may be able to enforce their rights against the company.
Before the claims are met, secured creditors are entitled to enforce their claims against the assets of the company to the extent that they are subject to a valid security interest.
When liquidation occurs the company does not have the power to dispose of its property.
It only remains operational in order to complete the liquidation.
Liquidation may either be compulsory (sometimes referred to as a creditors' liquidation following bankruptcy, which may result in the court creating a "liquidation trust") or voluntary (sometimes referred to as a shareholders' liquidation, although some voluntary liquidations are controlled by the creditors).
The term "liquidation" is also sometimes used informally to describe a company seeking to divest of some of its assets.