3 types of liquidation under the Insolvency Act 1986
Members voluntary liquidation
Creditors voluntary liquidation
Compulsory liquidation
Assumes all creditors will be paid in full during legal process. The Board of directors of Ltd Co pass a resolution to wind up the company. This is normally done when a company comes to a natural end due to:
Technology changes market
Set up for a purpose
Age of directors
Attempts to sell unsuccessful
The Co appoints an Insolvency Practitioner to assist directors. The Insolvency Practitioner prepares all paperwork.
Meeting of Directors called on same day as shareholders meeting ~ there is a Declaration of Solvency ~ To the best knowledge & belief that all creditors will be paid in next 12 months
Insolvency Practitioner acts as liquidator and writes to all creditors
Advertised in local papers & London gazette
Liquidator deals will all assignments & property matters
Straightforward ~ All liabilities will be paid in full
Occasionally goes into Creditors Voluntary Liquidation if all assets not realised
Monitor progress with Insolvency Practitioner
Lodge claim quickly
Most common form of insolvency ~ where the Co knows of its insolvency
There is unusually pressure from creditors, accountants, directors.
A resolution by Co is passed and an Insolvency Practitioner is appointed to assist directors
Insolvency Practitioner advertises in 2 local papers & London Gazette within 28 days of resolution
Writes to all known creditors on Co notepaper ~ Informing of Creditors meeting - The Proxy form & Proof of Debt form is enclosed.
Insolvency Practitioner will also notify shareholders
A resolution of 75% of shareholders present is required to wind up a company
Until the Creditors meeting all assets protected under law
A Liquidator is appointed at the Creditors Meeting
The Creditors meeting would be to
Update creditors of financial situation of Co
Confirm Liquidators appointment or otherwise
Appoint liquidation committee if required by creditors (3 - 5 creditors)
Liquidator advises his appointment in single local paper & London Gazette
From there on straight forward as for other insolvencies
Local Taxation debts frozen at date of liquidation.
The Liquidator normally attempts to dispose of premises quickly~ Liquidator not liable for Local taxes
Pre Liquidation debts normally written off Kaye v South Oxfordshire & Certain Exhibitions Limited
Actions that could be taken
Review papers
Review London Gazette
Distraint may be possible prior to Creditors meeting but be careful!
Attend Creditors meeting
Petition to Court by Creditor or Creditors
£750 minimum debt
Establishment of insolvency normally after failure on Statutory Demand lodged with Co.
May also arise where AR has failed to realise assets in a reasonable time and creditors wish to wind up Co.
Majority of shareholders can also petition for the company's winding up
County Court or High Court if the company has £250k paid up share capital
The Official Receiver becomes liquidator at the date of Court Order and stays in place unless or until another appointed
Where few or no assets OR stays in place without calling Creditor meeting
Creditors can challenge OR if 25% disagree the appointment
In cases where CAO or CVA in place court may appoint Insolvency Practitioner as Liquidator
OR retains cases where there is no incentive for private sector involvement - no likelihood of payment
OR may direct Insolvency Practitioner to act with Sec of States approval.
Where Insolvency Practitioner appointed or OR decides justified - meeting of creditors held and creditors can vote for different liquidator
They can also appoint Creditors Committee ~ the Liquidator & Committee must act under the law
Once completed - final meeting of Creditors will be held which will release Liquidator from his post
Similar to Creditors Voluntary Liquidation
May be interim & final dividend - Remote possibility
Debts - as per CVL
Appoint Firm to act as proxy at creditors meeting
Papers & London Gazette
Distraint not possible after order
Act on rumours
Ensure proof of debt returned
Have a good write off procedure
