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The key difference between a Members Voluntary Liquidation and a Creditors Voluntary Liquidation is that one is a procedure for a solvent company and the other is one for an insolvent company.

What Is A Voluntary Liquidation Procedure?

A voluntary Liquidation is a procedure that enables a company’s Directors and Shareholders to wind up a company. When a company needs an orderly winding up of its affairs a voluntary Liquidation is often the correct way forward.

A voluntary Liquidation is one that arises when in effect the Directors take the responsible step of recognising that Liquidation is the appropriate way forward and thereby jumping as opposed to being pushed into it either by the shareholders or the creditors in the case of a Compulsory Liquidation. For those reasons, it is described as a voluntary procedure that does not have to be undertaken.

What Is A Members Voluntary Liquidation Procedure?

A Members Voluntary Liquidation procedure is one in which the shareholders pass a resolution for a solvent company to be placed into Liquidation. The creditors are assured that they will get 100 pence in the pound plus interest within 12 months.

In practice, it is commonplace that the creditors will be paid in full early on in the Liquidation process or even before it has commenced. It is therefore unlikely that the creditors will ever have any stake in the Liquidation process except if it were to subsequently be discovered that the company was not solvent. This is the key difference between a Members Voluntary Liquidation and a Creditors Voluntary Liquidation.

The process is started by shareholders who approve the basis of the Liquidator’s remuneration and the Liquidator remains accountable to the shareholders.

What Is A Creditors Voluntary Liquidation Procedure?

A Creditors Voluntary Liquidation is a procedure in which the shareholders pass a resolution for an insolvent company to be placed into Liquidation. However, the shareholders do not remain in control of the process because what ever decision is taken by the shareholders is subject to confirmation later by the creditors.

It is the creditors to whom the Liquidator is accountable.

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