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So what does a liquidator do?
Liquidators, who have to be licensed Insolvency Practitioners will take over control of the company and will "liquidate" its assets to turn them into cash. These assets can be fixed tangible assets in the form of plant, equipment, or machinery. They can be assets such as intellectual property, domain names etc. They can also be debtors. In effect they sell the assets or collect money in from debtors.
In the event of an insolvent situation, the liquidator will sell the assets as quickly as possible to bring in cash to stop liabilities increasing and pay the creditors as much as possible. That does not mean assets will be sold at a bargain but due to the fact that time is of the essence then the prices achievable are likely to be lower than would be the case if they were sold in a more orderly fashion. The liquidator will normally ask a qualified valuer to assess the best achievable price on the assets and they are most likely to arrange their sale. Liquidators may also employ debt collection agencies.
Steps a liquidator takes to liquidate your business.
The first thing they will do is collate all the information on the business, who the creditors are, employees, details of charges, employees, leases, contracts etc, money owed and all other financial information.
They will then propose a creditors meeting to be held over the phone, online or at a physical meeting (which can depend on creditor preference). The IP will chair the meeting and the creditors will vote for the insolvency practitioner to be appointed as the liquidator of the company. The directors role then ceases and the insolvency practitioner will go about liquidating the assets of the business, terminating employment and other contracts.
A report will be issued to creditors and monies will be distributed to the creditors both secured and unsecured. However, in the event of a insolvent liquidation unsecured creditors will receive little.
In the event that a business is solvent and has no further use then a liquidator can be employed to release the cash in the business and pay out to the shareholders. This is called a Members Voluntary Liquidation or an MVL
This does need to be done carefully to minimize any tax liability.