Creditors' Voluntary Liquidation - Process The Board Meeting
A meeting of the board of directors is held to agree to convene meetings of members (shareholders) and creditors to wind up the company. The directors appoint a licensed Insolvency Practitioner "IP" to assist with this task. The IP will send notices of these meetings to the company's creditors and shareholders. Dealing with Assets
Steps are taken to secure and value the company's assets. It is not recommended that any assets be sold in the period before a creditors' meeting, unless the assets are likely to deteriorate or diminish in value (e.g. food) or goodwill will is likely to be lost. Preparation of Report
The directors have a responsibility to prepare a statement of the company's assets and liabilities and present a report to creditors explaining why the company has failed. In reality much of this work is done by the IP who has been appointed to assist the directors. Shareholders' Meeting
A shareholder's meeting is held to:
a) Pass an Extraordinary Resolution to wind up the company and;
b) Pass a special resolution to appoint a Liquidator.
Normally, shareholders must be given 14 days' notice of the meeting to pass the Extraordinary Resolution, however, this period can be shortened if in excess of 95% of the shareholders (in value) agree. At the meeting, more than 75% of shareholders, who are present or represented, must approve the resolution to wind up the company.
The Creditors' Meeting
The report prepared by the directors (with the assistance of the IP) is presented to a meeting of the company's creditors who have the opportunity to ask the director(s) questions about the company's failure and its financial position.
Creditors can either support the shareholders' nomination of Liquidator or appoint another IP as Liquidator. Voting is based on a simple majority and a creditor can vote for the value of their debt (voting rules are more complicated where a debt is disputed, unascertained or secured).
The Liquidator's Role
Once a Liquidator is appointed he/she will work together with the directors to realise the company's assets. The funds that are realised are then distributed to creditors in the priority laid down by the Insolvency Act 1986 and the Insolvency Rules 1986.
The Liquidator also has a duty to investigate the director's conduct and to submit a report to the Department of Trade and Industry within 6 months of the date of liquidation.
The Next Step
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