Liquidation is a process for handling assets of a company that is experiencing financial distress. It involves a formal technique where an independent insolvency practitioner Singapore is appointed by the court to distribute and realize the assets of the company among various contributors and creditors. Several solvent companies also apply voluntarily for going through members’ voluntary winding. In order to qualify for this procedure, the directors need to file a statutory declaration. This document must state that the company can pay off its debts within the coming 12 months after completing the liquidation process.

Insolvent companies are capable enough to apply for voluntary liquidation; however, they can also consider using compulsory liquidation or creditors liquidation procedures. The creditors’ voluntary liquidation can be processed by directors of the company and it is preferred in situations where the company is no longer able to continue its business due to existing liabilities. The director is required to file an official declaration at the court and based on this, a provisional liquidator Singapore will be appointed to handle various affairs. The meeting of creditors is expected to occur within one month from the date of declaration.

When to consider creditors’ voluntary liquidation?

Below are a few important reasons to consider a creditor’s voluntary liquidation:

  • The relevant company must have received a petition for winding up or it may be a statutory demand from a certain trade creditor. When a company is unable to pay off its pending debts, it wishes to go ahead with a creditor’s voluntary liquidation instead of compulsory liquidation.
  • The company needs to be insolvent at the time of the balance sheet test showing that the liabilities of the company exceed its assets. When only losses are increasing instead of profits, the directors of the business may get involved in wrongful trading activities. Insolvency practitioner Singapore can provide a reliable solution to this.
  • The company may be unable to pay rent and in such a scenario, the landlord may appoint bailiffs for seizing company assets.
  • When a company is not able to meet the pay agreement and has received a winding-up petition.
  • The company may have undergone a considerable range of bad debt and is further leading to consequences of liabilities while encouraging creditors to demand payments.
  • There may be a considerable shift in the industry that affects the ability to trade. For instance, some sudden change in the standards is causing losses in the trading activities of the company.

A creditor’s voluntary liquidator Singapore requires processing documents at multiple stages. In the first phase, the board of directors’ meeting must be held, and then they need to organize a meeting between directors and creditors. Next is the shareholder’s meeting which is further proceeded by the company liquidation procedure and ultimately they will dissolve the company. The main benefit of this type of liquidation is that it offers more control to directors in comparison to compulsory liquidation. If this procedure goes well, it can provide immediate relief from the pressure created by creditors and debtors. Furthermore, it can help companies to reduce the risk associated with wrongful trading.