Initial Consultation with The Business Debt Advisor
If directors’ of a company are concerned that it may be insolvent, they should take prompt action to address these concerns. It is always best to speak to a licensed Insolvency Practitioner who can work with the company to review its financial position, and provide advice on all of the available options.
When you first contact The Business Debt Advisor we will take some preliminary information from you, and arrange a face-to-face meeting to discuss your options in more detail. At this meeting you will have the opportunity to meet our Insolvency Practitioner, Beverley Budsworth, or a senior member of our corporate insolvency team.
We will arrange this meeting at a location which is convenient for you, and this consultation is entirely free of charge, and not subject to any obligation. We will spend as much time as is required to work through the company’s assets, its liabilities and whether or not it has a viable trading future. We ask that you assist by providing as much information as possible, and confirm what information will be required in advance of the meeting.
The Board Meeting
Following the initial consultation, the directors’ may agree that it is appropriate for the company to enter into CVL. If this is the case, a meeting of the Board must be held for the purpose of authorising Beverley Budsworth to act in relation to the company’s financial affairs. It will also be necessary to provide authority to convene a General Meeting of the company’s shareholders’, and seek a decision from the company’s creditors by way of a qualifying decision procedure.
Other administrative resolutions will be passed to enable The Business Debt Advisor to assist directors’ in the period prior to the shareholders’ meeting and the creditors’ decision date. A director of the company will be elected to chair the shareholders’ meeting and to sign all relevant documentation.
The General Meeting
A company can only enter into CVL if the shareholders’ of that company pass a special resolution for it to be wound up voluntarily, and this must be passed with a majority of at least 75%. The meeting will also pass an ordinary resolution to appoint a Liquidator to the company, and this must be passed with a majority of at least 50%.
Shareholders’ are usually entitled to receive 21 days’ notice of the meeting, although this period can be reduced if not less than 90% of the shareholders’ provide their consent to short notice (or not less than 95% if the company adopted model articles based on the Companies Act 1985).
The CVL commences from the passing of the special resolution by the shareholders’ (Section 86, IA 1986), although the passing of the ordinary resolution to appoint a liquidator to the company will be subject to ratification by the company’s creditors.
The Creditors’ Decision Procedure
With effect from 6 April 2017 there is no longer a physical meeting of creditors’ to appoint a liquidator to a company. In accordance with the current legislation a liquidator is now appointed pursuant to S100 Insolvency Act 1986 and Rule 6.14(8) of the Insolvency Rules 2016.
A decision as to the nomination of a liquidator can only be obtained from the company’s creditors’ by;
- Deemed Consent
- Virtual Meeting
The directors’ are required to deliver notice to the company’s creditors’ seeking their decision on the nomination of the liquidator, by either of the above procedures. The notice must contain details of the procedure and the proposed decision date. In practice, the nominated Liquidator will assist the directors’ in discharging this duty and ensure that the notices are fully compliant.
The decision date in relation to either procedure must be no earlier than 3 business days’ after the date on which the notice is delivered and not less than 14 days after the resolution to wind-up the company.
It should be noted that a requisite majority of the company’s creditors’ can object to this decision being reached by deemed consent or a virtual meeting. If the requisite majority of creditors’ object it will be necessary to convene a physical meeting of the company’s creditors’ must be convened.
Statement of Affairs
Directors’ of the company are obliged to prepare a statement of affairs within 7 days’ of shareholders’ decision to wind up the company, and send this to the company’s creditors’ at least 1 business day before the proposed decision date.
In practice, the nominated Liquidator will assist the directors’ in preparing this information, based on the financial information provided by the directors’. It remains the directors’ responsibility to ensure that the financial information contained within the statement of affairs is accurate.
Report to Creditors
The nominated Liquidator will prepare a report, on behalf of the directors’, to be made available to the company creditors’ at least 1 business day before the proposed decision date.
The report must contain detailed information, including a summary of the company’s trading history, an explanation of the company’s failure and an explanation as to the estimated deficiency of assets.
Additional Information to be provided to creditors’ before the decision date
In the period prior to the proposed decision date, the nominated Liquidator will furnish creditors’ of the company with information concerning the company’s affairs as may reasonably be required.
This information will be provided free of charge. Alternatively, the nominated Liquidator may state a place of relevant locality to the insolvent company, where, on the two business days immediately before the decision date, a list of the names and addresses of the company’s creditors will be available for inspection, free of charge.
Appointment of a Liquidator
The appointed liquidator has a duty to act in good faith, and to exercise their powers with reasonable care and skill. The liquidator’s primary function is to collect in, and realise the company’s assets for the benefit of the insolvent estate.
Where it is possible to do so, the Liquidator will make distributions to the company’s creditors’ in accordance with the secured or unsecured status. In some cases it may be possible to make a distribution of surplus funds to the company’s shareholders, but this will only be possible where there have been sufficient realisations to repay the company’s debts in full, together with interest.
Careful consideration must be given to all options available to a insolvent company. For more advice, fill out our Contact Form and we will be in touch. Alternatively, call our FREE ADVICE LINE on 0800 781 0990.