Creditors Voluntary Liquidation questions answered.
15/10/2013 | Creditors Voluntary Liquidation
How quickly can a creditors’ voluntary liquidation process start?
The process can be started immediately. The directors need to sign a resolution to appoint an Insolvency Practitioner to prepare a statement of affairs and to call a creditors meeting. In practice, there may be certain things that delay the commencement of the process - for example, completion of some work in progress or collection of an outstanding debtor. A timetable will be agreed between the directors and the Insolvency Practitioner.
Once I have decided to put my company into creditors voluntary liquidation, what must I watch out for?
There may be good reasons why a decision is made to delay formal commencement of the process. Directors need to make sure that the position of the creditors does not deteriorate and should not take any credit from a supplier knowing that they are unlikely to be paid. Directors should liaise with the Insolvency Practitioner through this period on a day to day basis.
How long is it before the meeting of creditors?
This depends on the period of notice that is required to call a shareholders meeting to formally put the company into creditors’ voluntary liquidation. Typically, this will be around four weeks from the date of the director’s resolution to discontinue trade. This date will be fixed with the Insolvency Practitioner at a convenient time to the directors.
Does the director’s resolution protect the company from any bailiff action whether this be the landlord or supplier or HMRC?
If there is any bailiff action the directors need to bring this very urgently to the attention of the Insolvency Practitioner. So long as the Insolvency Practitioner is aware of the circumstances it should be possible to get protection from creditor action.
How can the Insolvency Practitioner get protection from creditors?
This would be done either by way of bringing forward the meeting of shareholders and putting the company into a creditors voluntary liquidation process immediately or filling at court of behalf of the company a notice of intent to appoint an administrator. All the circumstances would need to be discussed carefully with the Insolvency Practitioner who would recommend a particular course of action.
What happens if a winding up petition has been issued against the company?
Any legal action being taken against the company, particularly a statutory demand or winding up petition should be immediately brought to the attention of the Insolvency Practitioner. The Insolvency Practitioner may be able to agree with the petitioning creditor that a creditors’ voluntary liquidation is the best way for the company to be wound up and the directors would still therefore choose the Insolvency Practitioner of their choice. If the company is insolvent, it is important to commence an insolvency process prior to a winding up petition being presented – once a petition has been issued the control of the whole process rests with the petitioning creditor and not the directors.
Once the directors have signed the resolution, can I refer all creditor call to the Insolvency Practitioner?
Yes. Any question or calls from any creditors including suppliers, employees or HMRC are referred to the Insolvency Practitioner who will deal with them.
What happens at the creditors meeting?
It is quite possible that no creditors will actually attend the meeting of creditors. If this is the case you will simply attend at the Insolvency Practitioners office, approve the statement of affairs and other documents. A time period of 15 minutes is allowed for any late creditors to attend before the meeting is formally closed.
The creditors’ meeting has four formal purposes:
An opportunity for the creditors to consider the statement of affairs produced by the directors.
An opportunity for the creditors to ask the directors any questions about how the company has been managed.
An opportunity for the creditors to ask the proposed liquidator any questions or bring any matters to his attention.
The appointment of a liquidator.
Is the choice of the director’s liquidation likely to be approved by the creditors?
Yes, in most cases creditors meeting will confirm the appointment of the liquidator put forward by the directors. In some instances, if there is a particularly large creditor, that creditor may prefer to appoint an Insolvency Practitioner of his own choice. In view of the voting rules, if this is the case, it may be that another liquidator could be appointed – but this is quite a rare occurance.