CVL - Use of company name after liquidation
What percentage of the shareholders' approval is required?
It is necessary that 75% of shareholders agree to this process taking place. So, if there are only two shareholders (each owning 50%), usually, the process cannot proceed.
What is the difference between a Creditors' Voluntary Liquidation and a Compulsory Liquidation?
The CVL procedure is initiated by the directors. A compulsory liquidation procedure is commenced (usually) by a creditor issuing a winding up petition through the court against the company. In the case of a compulsory winding up a date will be allocated for a hearing on the issue of the winding up petition. A winding up order is likely to be made at this hearing unless there is good reason for the court not to do so.
Who appoints a Liquidator?
In the case of a CVL the shareholders pass a resolution to wind up the company and appoint a Liquidator. At a subsequent creditors' meeting, the creditors' can then either confirm the shareholders nomination or appoint their own Liquidator by voting in person or in proxy. In practice, the creditors' usually support the proposed Liquidator of the shareholders. A Liquidator must be appointed by a majority (by value) of voting creditors'.
As a director will I be liable for the company debts?
Usually the answer is no – with limited liability status no liability attaches to the directors. If, as a director, you have given a personal guarantee to secure finance to the company then the lender would look to recover any balance due if the funds available from the realisation of the assets are insufficient to settle the debt. This may include bank borrowing, trade supplies, hire purchase or factoring agreements. We strongly recommend that you take legal advice if you think you have given any personal guarantees.
What are your charges?
The charges are usually agreed with the creditors' from the sale of the assets of the company. If there are no assets of the company it will be necessary to agree a fee which is personally guaranteed by the directors of the company.
Fees always depend on all the circumstances of the company but can start from as little as £2500 plus VAT plus disbursements (estimated at £750).
What is a proxy and how does it work?
A proxy is a formal instruction to a named individual or the chairman of the meeting (usually the director) to vote on behalf of the creditor at the meeting of creditors'. The proxy must be lodged at the place and by the time specified in the formal notice of the meeting.
What happens to the employees?
They are made redundant. The Government will meet various employee entitlements, including arrears of pay, holiday pay, redundancy pay and pay in lieu of notice, subject to entitlement and subject to limits which are periodically revised. These claims are paid by The Insolvency Service through the Redundancy Payments Office which then claims as a creditor in the liquidation. The Insolvency Service is an executive agency of the Department for Business Innovation and Skills.
Can I start another company with the same name?
This is possible but you need to be careful. Section 216 of the Insolvency Act prohibits the use of the same or similar name for a new trading venture.
Can I become director of another company if I liquidate my present company?
Yes, you can.
Will the liquidation of my company affect my personal credit rating?
No. The company is a separate legal person to you.