Liquidators can be accountants, lawyers, or business executives, depending on the case and legal requirements. Generally speaking, they are assigned by the court, by unsecured creditors, or by the company’s shareholders and have a fiduciary and legal responsibility to all involved parties, including the company being liquidated, the court, and any creditors. Until the assets of the company are sold and debts are paid off, the liquidator must make sure the liquidation process runs smoothly from start to finish. In the US, the main types of insolvency proceedings that include a liquidator are the following:
- Voluntary liquidation: This self-imposed dissolution of a company is one that is approved by shareholders and the board of directors when they decide that the company no longer has any reason to remain operational or has no viable future. A liquidator is thereafter appointed to close the company in a professional manner.
- Involuntary liquidation: This is when a company is forced to stop operating because it cannot pay its debts and a winding up order is issued by the court. The liquidator’s role is to investigate why the company failed and to deal with its assets and liabilities.
Liquidation under Chapter 7 of the United States Bankruptcy Code is the most common form of bankruptcy, and it can be either the debtor or creditor who files a petition for a Chapter 7 case to liquidate a company’s assets. Chapter 7 applies when the company doesn’t want any remaining control over the liquidation process and a bankruptcy trustee (liquidator) is appointed by the court to liquidate the assets of the debtor
Once the liquidator has been assigned, the next step is that they take control of the organization’s assets. Throughout the process, the liquidator is considered the “go-to” person who assesses the company’s assets, distributes them accordingly, and manages meetings between the company and its creditors.