Central liquidating assests
The company’s operations are brought to an end, and its assets are divvied up among creditors and shareholders, according to the priority of their claims. Not all bankruptcies involve liquidation; Chapter 11, for example, involves rehabilitating the bankrupt entity and restructuring its debts.
The court may appoint an official receiver, and one or more liquidators, and has general powers to enable rights and liabilities of claimants and contributories to be settled.Voluntary liquidation begins when the company passes the resolution, and the company will generally cease to carry on business at that time (if it has not done so already).A creditors’ voluntary liquidation (CVL) is a process designed to allow an insolvent company to close voluntarily.The decision to liquidate is made by a board resolution, but instigated by the director(s).
If a limited company’s liabilities outweigh its assets, or the company cannot pay its bills when they fall due, the company becomes insolvent.
In such cases, investors in preferred stock have priority over holders of common stock.