Voluntary liquidation occurs when the members of a company resolve to voluntarily wind up its affairs and dissolve.
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).
The liquidator may also have to determine whether any payments made by the company or transactions entered into may be voidable as a transaction at an undervalue or an unfair preference.
Where a voluntary liquidation proceeds as a creditors' voluntary liquidation, a liquidation committee may be appointed.
Where a voluntary winding-up of a company has begun, a compulsory liquidation order is still possible, but the petitioning contributory would need to satisfy the court that a voluntary liquidation would prejudice the contributors.
The liquidator will normally have a duty to ascertain whether any misconduct has been conducted by those in control of the company which has caused prejudice to the general body of creditors.
In some legal systems, in appropriate cases, the liquidator may be able to bring an action against errant directors or shadow directors for either wrongful trading or fraudulent trading.
In the event the company does not file an annual return or annual accounts, and the company's file remains inactive, in due course, the Registrar at Companies House will strike the company off the register.
Under the corporate insolvency laws of a number of common law jurisdictions, where a company has been engaged in misconduct or where the assets of the company are thought to be in jeopardy, it is sometimes possible to put a company into provisional liquidation, whereby a liquidator is appointed on an interim basis to safeguard the position of the company pending the hearing of the full winding-up petition.For example, a party who had a valid contract for the purchase of land against the company may be able to obtain an order for specific performance, and compel the liquidator to transfer title to the land to them, upon tender of the purchase price.After the removal of all assets which are subject to retention of title arrangements, fixed security, or are otherwise subject to proprietary claims of others, the liquidator will pay the claims against the company's assets.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).In most legal systems, only fixed security takes precedence over all claims; security by way of floating charge may be postponed to the preferential creditors.