Guide to Company Liquidation in Ireland
Liquidation occurs when a business is unable to continue trading and needs to shut down its business operations. This can be due to a variety of reasons but for the most part, it is because of financial difficulties. Winding-up a company in Ireland can be carried out in three ways: court liquidation, members’ voluntary liquidation and creditors voluntary liquidation.
Court liquidations, as the name suggests, are carried out by order of the court on foot of a petition taken by a secured or unsecured creditor. In contrast, both Members Voluntary Liquidations and Creditors Voluntary Liquidations are voluntary procedures.
What is a Members Voluntary Liquidation (M.V.L)?
A M.V.L occurs when a solvent company has ceased trading or has become dormant. The aim of a Members Voluntary Liquidation is to distribute the company assets and release cash in the most tax-efficient method possible.
What happens during a M.V.L?
The M.V.L process begins when the directors/shareholders of a business decide on liquidating the company and appoint a liquidator of their choice.
The liquidator then takes control of the business and is responsible for:
- Paying any outstanding debts to creditors
- Ensuring all outstanding debts to Revenue are paid
- Getting a Tax Clearance Certificate
- Allocating excess funds to shareholders
- Calling a final meeting to liquify the business
What is a Creditors Voluntary Liquidation (C.V.L)?
A C.V.L occurs when a company is no longer able to pay its debts. This could be having payroll issues or paying suppliers. The process becomes necessary when the company’s liabilities are greater than its assets, therefore making it insolvent. When this is the case, the company’s directors are legally required to put the company into liquidation.
What happens during a C.V.L?
The C.V.L process begins with the directors of the company calling a meeting of the board to discuss the financial situation.
If it is decided the company is insolvent, subsequent meeting with shareholders and creditors must be organised. The liquidator is appointed at the shareholders meeting, which takes place first. However, this liquidator must be approved by the subsequent creditors meeting.
Once a liquidator has been ratified, they carry out the remaining steps in the winding-up process. The liquidator is required to report to the Director of Corporate Enforcement stating if there was any misconduct in the running of the company.
Which one is best for your business?
The answer to this entirely depends on your own specific situation. If your company is solvent, a members’ voluntary liquidation will be your best option. On the contrary, if your business is insolvent, a creditors’ voluntary liquidation is applicable.
A point worth noting is that when a members’ voluntary liquidation is complete, shareholders receive the process of the sale. Whereas creditors receive the proceeds from the sale of assets in a creditors’ voluntary liquidation.
Our expert team can help you through the liquidation process
Russell and Co. have a long and successful track record in liquidation. We have helped Irish businesses for over 40 years through difficult times. Our team’s expertise combines a cross departmental team of specialists from to provide the best results possible for our clients.
We offer free, confidential advice to company’s in financial difficulty. Call us today on 021 4963679 for quick liquidation and insolvency advice.