A liquidating market is one in which the majority of investors are leaving or selling off their securities traded in that market, so that overall there is a general liquidation of securities in that market.A liquidating market can occur for pretty much any type of security if the right conditions develop.After every liquidation process the liquidator is required to investigate all actions taken by the directors while the company was trading insolvently.If it can be shown that the directors did not act in the best interests of creditors then they may be accused of wrongful trading.Sometimes company directors will pursue a voluntary liquidation because “there isn’t enough money to repay all of the debt” or “rescuing the company will be too costly.” While these may seem to be legitimate justifications, the fact still remains that directors are legally obligated to act in the best interests of creditors as a whole.Obviously, hastily ending a company through a CVL is not in the best interest of creditors, as most of the time it results in debts going unpaid.An asset that is not performing well in the markets may also be partially or fully liquidated to minimize or avoid losses.An investor who needs cash to fulfill other non-investment obligations, such as bill payments, vacation expenses, car purchase, tuition fees, etc. Financial advisors tasked with allocating assets to a portfolio usually consider, among other factors, why the investor wants to invest a certain amount of money and for how long s/he would like to invest for.
In a voluntary liquidation, these expenses, along with the cost of appointing an insolvency practitioner, are all covered by the directors.
For this reason a CVL should be considered as a last resort, only after alternative options that would allow the company to continue trading have been examined (i.e.
– pre-pack administration, company voluntary arrangement (CVA), or asset financing).
In a compulsory liquidation the company is wound up by one of its creditors or HMRC after failing to pay a debt of more than £750.
A creditors’ voluntary liquidation takes place when the directors purposefully choose to liquidate the company.
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Any director found guilty of this could be banned from acting as the director of any limited company for up to 15 years after the liquidation.