Solvent Liquidation

A liquidation can either be solvent or insolvent. A solvent liquidation is handled through a Members’ Voluntary Liquidation procedure. Companies involved in this liquidation procedure are in fact able to pay all their creditors but can still be wound up simply because they are no longer useful.

Companies that are able to discharge all their liabilities within a twelve month period can be liquidated by way of a members voluntary liquidation. This requires the directors to make and deliver to the Registrar of Companies a declaration of solvency which includes a statement of the company's assets and liabilities.

The company is placed into liquidation by the members either by passing a written resolution or by passing a shareholders' resolution at an Extraordinary General Meeting convened for that purpose. In a members' voluntary winding up, the creditors of the company play no part, as the assumption is that all debts will be paid in full. Should, however, the liquidator conclude at a later date that the company will be unable to pay its debts either within the twelve month period or in full, he must convene a meeting of the creditors and proceed with the liquidation as a creditors' voluntary liquidation.

It is a criminal offence for a director to make a declaration of solvency without having reasonable grounds for making it.