Insolvency

Liquidation is the process of ending, or ‘winding up’, a business, whereby the assets of the business are collected and then sold in order to repay creditors. Liquidation can take one of three forms. If the company is unable to pay its debts and the shareholders agree to liquidate the company then this is known as creditors’ voluntary liquidation. If, on the other hand, shareholders do not agree then compulsory liquidation may occur and this induces Court proceedings. The third form of liquidation is known as members’ voluntary liquidation, whereby the company is able to pay its creditors but shareholders wish to wind up the business anyway.

When a company enters liquidation the primary objective will be to meet as many of the outstanding creditor claims against the company as is possible. The priority of claims therefore establishes the order in which those with a claim against the company should be paid. The liquidator’s costs are considered to be of primary importance, followed by creditors who have a fixed charge over assets. Shareholders are the last to be paid, with any remaining unclaimed assets going to the Crown as bona vacantia.

The term “calling in a loan” refers to when a lender demands full repayment of a loan within a short period of time, and refuses to renew the loan. This can occur if you fail to meet the terms of your loan or have defaulted on your loan.

An LPA receiver is a person who is appointed to enforce a charge over your property. They are appointed by a lender who holds a fixed charge over your property in order to recover the debt due. An LPA receiver has specific powers and duties to deal with the property, which can include being appointed with a view to selling the charged property or collecting rental income on behalf of the lender.