The most common way of closing a company with serious financial difficulties is by placing the company into liquidation. Although liquidating a company is a relatively straight forward process, there are numerous issues that need to be addressed to ensure that this process is carried out correctly. We have therefore set out below a summary of the most frequently asked questions and answers.
Liquidating a Company
Firstly, you need to be satisfied that liquidating your company is the most appropriate option. There are a number of options available for dealing with companies in financial difficulties, and we would recommend that before making a final decision you seek experienced professional advice from someone like ourselves.
If liquidation is the only option, then you will need to speak with a Licenced Insolvency Practitioner – only a licenced practitioner can act as a liquidator. The Insolvency Practitioner will explain the steps involved in actually placing the company into liquidation.
What is the company liquidation process?
Once it has been decided that company liquidation is the most appropriate solution, the company will need to convene a meeting of its directors. At this meeting, certain resolutions will be passed, recognising the company’s insolvent position and arranging to convene a meeting of the company’s shareholders and the company’s creditors. We will produce all of the relevant resolutions, notices and paperwork required to start the process of liquidating your company.
What notices are required to be given to creditors and employees?
After our initial meeting with you, we will have collected all the relevant information to assist you with the process of liquidating your company. Immediately after the director’s meeting has been finished, we will then deal with notifying all of your creditors and all of your employees. Your creditors will receive a notice convening a meeting of creditors which must be held at no less than 9 days’ notice after the director’s meeting and no more than 28 days after that meeting.
We will also speak with all of your employees explaining why the company is going into liquidation and we will assist them in claiming their rights and entitlements from the Redundancy Payments Office.
What happens in the period between the director’s meeting and the meeting of creditors?
As a director, you are still responsible for all of the company’s actions during this period, although in reality, any decisions that need to be taken during this period will usually be after being advised as to what to do by the insolvency Practitioner.
Can the company sell assets before the creditor’s meeting?
One the decision to liquidate the company has been taken, and the board resolutions passed, the company is effectively moth balled, until the outcome of the creditors’ meeting. During the period between the director’s meeting and the creditor’s meeting, the only time that trading would continue, would be to either finish off work in progress with the agreement of the customer to pay, or to dispose of perishable items that would otherwise diminish in value.
How is the liquidator appointed?
Most company liquidations use a process known as Creditor Voluntary Liquidation. The directors of the company to be liquidated chose an Insolvency Practitioner to help them get the process of liquidation underway. The shareholders and creditors will then vote on the director’s choice at their respective meetings. The shareholder’s meeting usually takes place half an hour before the creditor’s meeting – these meetings are after the minimum 9 day notice period following the director’s meeting.
If a majority of the creditors decide to appoint a different insolvency practitioner, then so long as the creditor’s majority is over 50% of the creditor’s claims in value, the creditors’ choice will be appointed. It is fairly unusual for this to happen though – it is more likely to happen in larger cases.
What happens at the creditor’s meeting?
By law, one director must attend the creditor’s meeting and act as chair person. The purpose of the creditor’s meeting is to receive a report on the history of the company in liquidation, to be presented with a statement of affairs and to ask the directors any questions that the creditors see fit on the conduct of the directors.
Although a director will formally act as chairperson, it is the insolvency practitioner that will deal with the presentation of the history, the statement of affairs and any other matters that are deemed relevant.
Once all the questions have been dealt with, various resolutions are then put to the creditors to vote on. These include:
- Confirmation of the resolutions passed by the shareholders -i.e. the company is insolvent and should be placed into creditor’s voluntary liquidation
- A resolution confirming the appointment of the named insolvency practitioner as liquidator
- Resolutions allowing the liquidator to appoint agents to help with the disposal of the company’s assets and the appointment of solicitors if necessary.
- A resolution dealing with how the liquidator’s costs will be paid.
When is a liquidator formally appointed?
Although you will bring in an insolvency practitioner to help you decide whether liquidating your company is the correct approach, and the insolvency practitioner will help you with the process of preparing for liquidation, the practitioner is only formally appointed at the creditors’ meeting.
Can a director buy back the company assets?
The simple answer is – YES – so long as the director’s offer is the highest received.
How are the company assets sold?
As part of the process in preparing to liquidate your company, the insolvency practitioner will arrange for the company assets to be professionally valued by a reputable firm of valuers – this usually happens on the day of the director’s meeting or very shortly thereafter. The agents will attend the company’s premises and produce a full inventory of all assets and a valuation based on both a going concern basis and a break up basis. No assets should be sold until after the creditor’s meeting. The insolvency practitioner may though, in conjunction with his agents speak to potentially interested parties prior to the creditor’s meeting to try and increase the value of any potential offers.
The Liquidator, once appointed is under a statutory duty to maximise the realisations from the sale of the company’s assets – if that means selling them back to the directors, even if the creditors are unhappy with that decision, then that is what must be done.
What does it cost to put a company into liquidation?
There is no set fee for liquidating a company. The liquidator must by law keep detailed records of all time spent on each liquidation and it is usual for the liquidator to seek a resolution at the creditor’s meeting, that his costs are paid on a time cost basis. In October 2015 additional provisions were brought into force in respect of liquidator’s fees. In all creditor voluntary liquidations, the liquidator must now set out details of the estimated costs of dealing with all aspects of the liquidation at the creditors meeting and seek the creditor’s approval to that estimate.
In the event that the liquidator’s costs exceed the original estimate approved by the creditors, then the additional costs can only be paid if the creditors agree to them.
Who pays the liquidator’s fees?
In most cases, the liquidator’s fees and costs are paid out of asset realisations.
Can I ask for a quote to liquidate my company?
Of course – here at Corporate Financial Solutions, we pride ourselves, not only on the exceptional standard of professionalism, care and attention given to each case, but also on our ability to be extremely cost effective. We would need some very basic information on the company to be liquidated – simply call us on 0115 838 7330 or email us at firstname.lastname@example.org.
Instant CVL Cost Quote
For an instant quote for creditors voluntary liquidation, without the need to send your details, use our creditors voluntary liquidation cost calculator.
Company Liquidation Advice
We are happy to give company liquidation advice. Please call us or fill in our enquiry form. We are always happy to give advice and we provide free consultations.