About 1 of every 341 active companies in the UK entered liquidation between October 2020 and the end of September 2021.
Are you a creditor that is going to head into liquidation with a company soon? You will want to get the help of a registered professional to act as a liquidator during this process!
It can be a complex task to submit a wind-up petition and work with the courts, but it’s well worth it to get fairly paid as a creditor or shareholder.
Keep reading as we explain what a licensed practitioner does and why they are hired to help liquidate a company.
Compulsory liquidation is a type of court-based procedure. It helps distribute a company’s assets to its creditors that are due payment.
The procedure starts with a winding-up petition, which you can read more about at the linked website. This petition is often presented by a creditor of the company, but other parties are also able to petition the court.
The most common reason for a winding-up order is that a company has become insolvent. At the end of the liquidation process in a compulsory case, the company becomes dissolved.
After the winding-up order is made, the company’s creditors are allowed to appoint a licensed insolvency practitioner to act as the liquidator. They act as an officer of the court and have a duty to be fair and impartial.
The main role of a licensed practitioner is to collect and realize a company’s assets and then distribute said assets to the creditors or anyone entitled to it. They are the ones that carry out the actual “payout” process after the liquidation has begun.
Once hired, each creditor is able to provide the licensed practitioner with their claim or proof of the debt. The liquidator will take all of this information in and asset it to accept or deny the claims.
The licensed practitioner will be paid out of the company’s assets as an expense of the winding-up petition, but only after creditors holding fixed charge security have received their payments. There are rules in place regarding how a liquidator’s fees must be laid out.
If creditors think that a liquidator isn’t doing their job properly, they can challenge the liquidator’s decision regarding proof of debt.
If challenging due to denying a proof of debt claim or dividend purposes, there are specific rules that must be followed as laid out in the national insolvency guidelines.
Liquidators can get removed from the process by a court order under severe circumstances.
The main goal of a licensed practitioner in a compulsory liquidation case is to assess, review, and distribute the assets of a company that is being dissolved. Creditors can work with the court to find a licensed and registered person to carry out these important duties.
If you found this article useful, be sure to take a look t the rest of our website for more information on insolvent businesses in the UK.
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