When
is a CVL appropriate?
What
meetings need to be held?
Do
the meetings need to be advertised?
What is the
aim of the creditors meeting?
What
will the bank’s reaction be to a CVL?
What will
happen to the employees?
What are
the liquidator’s duties?
Can the directors or another associate purchase the assets from the Liquidator?
What actions could lead to the disqualification of the directors?
Would I be personally liable for the company's debts?
How does
the Liquidator get paid if there are no assets
or cash in the company?
When
is a CVL appropriate?
This would only be appropriate when the company is insolvent and no longer viable.
What meetings
need to be held?
The directors would hold a board meeting to consider the Liquidation and pass the resolution to hold an extraordinary general meeting of the members.
A meeting of members is held first to pass the resolutions to place the company into Liquidation. This is usually followed thirty minutes later by the meeting of creditors.
Do the meetings need
to be advertised?
The creditors meeting is advertised
in the London Gazette and two newspapers which circulate
in the area local to the company.
The appointment of a liquidator is then advertised
in the London Gazette and one of the local newspaper,
in the locality of the company.
What is the aim of the creditors
meeting?
The creditors' meeting is statutory and this allows the creditors to attend the meeting and receive a report on the company, the state of its affairs, ask the director(s) questions, raise any issues with the proposal and vote on the appointment of a Liquidator.
Creditors rarely attend the meetings.
What will the bank’s
reaction be to a CVL?
The bank would stop all payments from the company's accounts. However it would allow receipts either into the company's account or into a separate account.
If the bank has security over any assets, then it could take the decision to appoint an Administrative Receiver. However, they would only do this if the amounts were material.
If an individual has personally guaranteed the bank's indebtedness it could demand payment from them. This usually occurs once a Liquidator has been appointed and the bank has more information on which to assess its financial position.
What will happen to the employees?
Any employees at the date of the Liquidation would be dismissed. They would be provided with documents and details of how to claim the monies due to them from the Redundancy Payments Office.
Once the forms have been submitted they are forwarded to the appropriate office and a claim is made from the National Insurance Fund.
What are the liquidator’s
duties?
The Liquidator has the task of realising (selling)
all the assets at market value and the proceeds
deposited in a designated trust account.
The Liquidator would consider the claims of the creditors. Following the deduction
of fees, payment would be made on the agreed claims in the order of priority.
The Liquidator also has the duty to investigate the conduct of the directors and report their findings to the Department of Trade and Industry (DTI) . This report is confidential and is submitted on all liquidations.
Can the directors or another associate purchase the assets from the Liquidator?
The Liquidator's duty is to sell the assets for the highest possible price.
There is therefore nothing to prevent the directors submitting an offer for the assets of the company and, if accepted, purchasing them.
If this is the directors' intentions, then it must be disclosed at the meeting of creditors and in future reports.
Can the directors of the liquidated
company become directors of another company?
Your right to be a director or hold a position of trust is not eroded when a company in which you have held such a position goes into Liquidation.
However, this right disappears if you are disqualified from being a director or are made bankrupt.
What actions could lead to the disqualification of the directors?
trading whilst knowing that the company was insolvent;
paying certain creditors in preference to others. This can include paying monies into the bank account to eradicate an unsecured overdraft;
taking deposits with the knowledge that the order cannot be fulfilled;
incorporating a phoenix company and utilising the
same, or similar name to that of the liquidated company;
placing assets out of the reach of creditors;
allowing transactions at an undervalue (i.e. selling assets at a value which is lower than that which could be achieved on the open market);
not maintaining adequate books and records; and
not filing accounts.
These are just a few of the matters which may be reported. It
is then the decision of the DTI as to whether the directors
will be disqualified.
Will I be personally liable
for the company’s debts?
When a company is limited, the assets and liabilities
belong to the company and the directors are deemed to
be officers of that company.
The debts therefore
belong to the company.
However, the director could be personally liable if they have provided a guarantee for any of the company's liabilities or contracts.
In addition to this, if there has been a breach of the insolvency legislation, the directors could be pursued.
How does the Liquidator get paid if there are no assets or cash in the company?
The directors would be asked to pay the Liquidator's fees. Alternatively the company could go into Compulsory Liquidation.
We understand
that you may require guidance and encouragement to
help you through these difficult times.
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