When must an MVL be converted to a CVL?

What happens when a liquidator cannot pay all creditors in what was supposed to be a solvent liquidation

Whenever t directors of a company place their company into a Members Voluntary Liquidation they believe that:

- The assets of the Company are of value and a sifficient amount can be realised by the liquidator to pay all of those creditors and

- Make a repayment of the surplus sum to the shareholders.

Once the members liquidator is appointed however he might find that further creditors come out of the woodwork or that the assets cannot realise what the directors first thought. If these two factors together result in a position that all creditors cannot be paid in full with interest then Sections 95 and 96 of The Insolvency Act 1986 are brought to bear.

Under Section 95 the members liquidator is obliged to call a meeting of creditors to discuss the position. At that meeting the creditors may appoint a liquidator of their own choice.

The common sense of these rules might be summed up by saying:

1. If all creditors are to be paid in full in any event then those creditors need have no say in who is appointed as liquidator. In this instance the shareholders (members) actually choose who the liquidator is to be.

2. If however there re insufficient assets to pay all creditors in full it is the creditors who determine who will act as liquidator.