What Is A Centrebind Liquidation?

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Liquidation can take place in many different forms depending on the individual circumstances of the company. If the company has failed to respond to creditor demands then it may be closed via a compulsory liquidation. Alternatively, directors may choose to voluntarily liquidate their company via a Member’s Voluntary Liquidation (MVL) if the business is still solvent, or via a Creditor’s Voluntary Liquidation (CVL) for insolvent companies. One term that you may also have come across is ‘centrebind liquidation’. What is centrebind liquidation and which companies is it appropriate for? Let’s find out. 

A typical liquidation process can take anything from three months to a year, in which time the assets are sold for the benefit of creditors. A centrebind liquidation is the same as a CVL, however it involves speeding up the time in which a liquidator is appointed. The aim of a centrebind liquidation is to enable the liquidator to start disposing of the company’s assets more quickly, in order to protect perishable assets that could lose their value quickly. 

The name ‘centrebind liquidation’ comes from a 1960s court case involving a company called Centrebind Ltd.The company entered liquidation and won a court case enabling the sale of the business’ perishable goods before obtaining agreement from creditors. 

What Makes A Centrebind Liquidation Different?

As we mentioned a second ago, a centrebind liquidation is not an alternative to a CVL, but rather speeds up the process of a CVL in order to protect perishable assets. Furthermore, centrebind only applies to a CVL.

When a company is placed into a CVL, a meeting of shareholders and decision of creditors is convened. The shareholders place the company into liquidation and appoint a liquidator (known as a members nominated liquidator). Creditors either ratify the appointment of the members nominated liquidator giving them full powers, or appoint an alternative liquidator. In most CVL cases, the decisions of shareholders and creditors happen on the same day. 

With ‘short notice’, the shareholders meeting could be held immediately to appoint a liquidator before creditors receive notice of what is going on. This would be appropriate for a centrebind liquidation, where the distribution of perishable assets is more time sensitive. However, it is important to emphasise that the powers of the liquidator who has been nominated by shareholders are limited until their appointment has been ratified by creditors. Per rule 6.14 of the Insolvency (England and Wales) Rules 2016, the decision may take place up to 14 days after the decision of shareholders to place the company into liquidation. 

When Is Centrebind Liquidation Appropriate? 

Centrebind liquidation is appropriate for companies in which perishable goods make up a significant part of the assets. This might include companies in the hospitality industry, fresh food outlets or farming businesses. In short, any business in which the assets may lose their value over time if left to perish. 

If you are considering placing your company into liquidation, our experienced team of insolvency practitioners at My Liquidation are here to help. Based on your business’ individual requirements, we can advise you on the best path forward, and the liquidation options that are available to you. Please don’t hesitate to get in touch with us today for confidential advice. 

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