Creditors' Voluntary Liquidation is the most common process for businesses which are insolvent and need to close through a formal winding-up. It is a quick and effective way for Directors to deal with their business, deal with their creditors and in turn, fulfilling part of their statutory duties by protecting creditors from incurring potential further losses.
How do I put my company into Liquidation?
The process is relatively straight forward. It will commence with an initial meeting between the directors of the company and a Licenced Insolvency Practitioner.
Time is taken to discuss all the options and possible alternatives available to the directors and company. If Liquidation is the agreed route, the directors will sign Notices calling a meeting of shareholders. 14 clear days’ notice must be given to each shareholder of the meeting, although this notice period can be waived with the consent of 90% of shareholders.
The Insolvency Practitioner will assist the directors/company with all the required steps to place the company into Liquidation. Information and support will also be given to employees and directors to enable them to make appropriate claims to the Redundancy Payments Office to recover statutory entitlements such as redundancy pay, accrued wages, accrued holiday pay and notice pay.
At the shareholders’ meeting, shareholders will pass a special resolution to place the company into Liquidation and an ordinary resolution for the appointment of a Liquidator. The nominated Insolvency Practitioner is now appointed as Liquidator over the Company, although his/her powers are limited to be exercised before the Section 100 decision by the creditors (the creditors’ decision procedure typically being held later that day).
Under the old rules, a creditors’ meeting used to have to be called. There are now two processes which can followed to gain creditor approval for the appointment of the Liquidator and the decision on whether or not to form a creditors’ committee. The Insolvency Practitioner will suggest which of the two processes to follow:
Notice of Deemed Consent:
Three business days’ notice is required to be given to creditors of a Deemed Consent procedure. A Statement of Affairs and Sip 6 Report is to be sent to creditors at least one business day before the decision date. Advertisement of a Deemed Consent procedure is optional.
At 11:59pm on the decision day (typically, the same day as the shareholders meeting), creditors will have deemed to approve the resolutions put to creditors, unless the threshold of 10% of creditors in value, 10% of creditors in number or 10 creditors have been met for the request of a physical meeting. In this case, the members’ appointed Liquidator will call a physical meeting within 14 days of the requests/objections.
Virtual Meeting procedure:
As an alternative to the Deemed Consent procedure, a virtual meeting can be called where creditors will be invited to attend a meeting by video conference or similar. Three business days’ notice is given to creditors of this meeting. Advertising of a Virtual Meeting is required.
Proxy forms for voting purposes can be lodged with the Insolvency Practitioner any time up to the meeting. Proof of debts will need to be lodged with the Insolvency Practitioner at any time up to 4pm the business day before the virtual meeting.
Resolutions considered at the virtual meeting will include the approval of the members’ Liquidator to act as the creditors’ Liquidator and whether a liquidation committee should be formed.
Physical creditors’ meetings are now only held on the request of creditors who meet one or more of the thresholds mentioned above.
If a physical meeting is requested, the Insolvency Practitioner will be required to notify all creditors of such meeting at which the aforementioned resolutions will be considered. Other resolutions may be taken, including one for approval of fees, in certain circumstances.
The Liquidator must be a Licenced Insolvency Practitioner. Aside from a number of statutory filings and correspondence, one of the main roles of the Liquidator is to collect in a company’s assets and distribute them to creditors in a specific order. The Liquidator will also investigate the failure of the company and the conduct of the directors in the running of the company.
How much does it cost to liquidate a company? The answer is invariably dependent on what the Liquidator is required to do within the case. Are there lots of assets to deal with? Are there lots of creditors? Is there a lot of investigative matters to look into? A Liquidator's cost can run from a few thousand pound to significantly more depending on what he or she is required to do.
Ultimately, a Liquidator is remunerated from the realised assets in each case. The level of this remuneration is by agreement with a creditors' committee or creditors generally, where no committee is formed.