There are two types of liquidation for insolvent companies:
1. Creditors’ Voluntary Liquidation (CVL)
When a company accepts it cannot pay its debts, its members pass a special resolution to say that it cannot continue in business because of its liabilities and that it is advisable to wind up. A meeting of creditors must be held in the next 14 days after passing the resolution
2. Compulsory Liquidation (CL)
CL is when the company is ordered by a court to be wound up. There are a number of potential applicants, however the most common is on the petition of a creditor on the grounds that the company cannot pay its debts or where it has not been possible to reach a voluntary agreement on liquidation.
Unless the execution has been completed before the winding up has commenced then you will not be able to proceed with the enforcement and, unless you hold some other form of security, you will be treated as an unsecured creditor in the liquidation.
For CLs, Section 128 of the Insolvency Act 1986 (“the Act”) also makes void any execution after a winding up has commenced.
What do we mean by “commencement of the winding up”?
For a CVL, commencement means the date that the members’ resolution is passed (Section 86 of the Act).
For a CL, commencement means the date the winding up petition is presented to the court.
Completion of execution
So, what is meant by completion of execution? Section 183 of the Act applies to both types of liquidation and sets out the position in greater detail, but briefly:
Execution against goods is completed by seizure and sale; Execution against property is completed by the obtaining of a Final Charging Order (an interim order is not sufficient); An attachment of a debt owed by a third party to the debtor company is completed by your receiving such monies from the third party Execution against land is completed by seizure, the appointment of a receiver or the obtaining of a charging order as outlined above.
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