Before any final decision is made, it is always important to explore the alternatives. One of the first questions we ask is what do the directors want? Often, the reply is to keep the company going, but they cannot see how this is possible. This is when an experienced IP may be able to help. Alternative procedures will be reviewed such as a Company Voluntary Arrangement, Administration or a pre-pack sale. Liquidation is often a last resort.
The basic steps to winding-up your company:
• Directors hold a Board Meeting to confirm that the company should be placed into Creditors Voluntary Liquidation. An IP is instructed to assist with the process
• Notices calling a meeting of shareholders (General Meeting) and creditors (S98 meeting) are sent out. Creditors are given 7 days’ notice of the S98 meeting. Shareholders are given 14 days’ notice of the General meeting, but this notice period can be waived by agreement of 90% of shareholders. In practice, these meetings are held concurrently on the same day.
Before the meetings
• The instructed IP will produce a Report on behalf of the directors. This will show the history and financial information of the company. The IP will also assist the directors in producing a Statement of Affairs which sets out the book values and estimated to realise values of the company’s assets and liabilities.
• An advert calling the meetings is required to be placed into the London Gazette.
• Accounts are brought up to date, as far as possible.
• The IP will talk to employees about their rights and assist them in claiming what they are entitled to from the Redundancy Payments Office.
• The company’s bank account will be frozen with any credit balance being transferred to a client’s account.
• The company’s assets will be protected with agents instructed, where necessary
• The IP will be liaising with creditors to ensure that claims and proxies are received in time.
At the meetings
• A quick board meeting is held to approve the Report and Statement of Affairs which are to be handed out at the shareholders and creditors meetings. The board will also appoint one of its directors to act as Chairman, although the meetings will be conducted through the IP.
• The shareholders meeting is held at which point the company is formally placed into Liquidation and the instructed IP appointed as Liquidator.
• The creditors meeting is held shortly after the shareholders meeting. It is here where creditor have the opportunity to ask questions of the directors and the Liquidator.
• Resolutions are considered which include the confirmation of the appointment of the Liquidator or putting their own choice of Liquidator in to act. Creditors will then have the option of forming a creditors committee. If a committee is not established, creditors will vote on how the Liquidator is to be remunerated (although this resolution is likely to be passed at a later meeting pending a rule change in October 2015).
After the meetings
• The appointed Liquidator will write to all creditors with a copy of the Report, Statement of Affairs and summary of the resolutions passed at the meeting.
• The Liquidator’s main role is to then collect in the company’s assets and distribute them to the creditors in priority as set out in the Insolvency Act 1986.
• The Liquidator also has a duty to investigate and submit a report on the conduct of the directors.
If you are a director of a limited company and considering liquidation or have a client who is facing financial difficulty, you can contact our Licenced Insolvency Practitioner on 01392 288555 or e-mail: firstname.lastname@example.org for a discussion and a free no-obligation meeting.
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