Ideally, company insolvency would always be easy and never involve debts or disagreements between shareholders and directors. The reality is that the process can be complex, which is why the advice of a Licenced Insolvency Practitioner should always be sought. Below are multiple points to consider when going through voluntary liquidation.
Initiating Liquidation & Submission
For member’s voluntary liquidation, the directors must swear the Statutory Declaration of Solvency before a solicitor, and then pass a special resolution to wind up the company. Following this, they must send a copy of the resolution to Companies House. They must also publish their notice to creditors in the London Gazette, and, at the end of the process, a notice of a final meeting is also published in the Gazette.
In a creditor’s voluntary liquidation, the members must hold a meeting to pass a resolution to wind up the company. However, a creditors meeting must also be held within 14 days for which a minimum of 7 days’ notice must be given.
In both types of voluntary liquidation, the liquidator is responsible for the company in terms of selling assets, making creditor payments, dealing with HMRC and, in a Members Voluntary Liquidation, making the distribution to shareholders. Directors do not have any power unless it is given by the liquidator.
In the case of compulsory liquidation, the items to be covered are quite different.
- The appointed liquidator in compulsory liquidation must report to the Insolvency Service if he discovers any unfit conduct of the directors. If evidence of unfit conduct exists, director bans between two and fifteen years may result.
- Compulsory liquidation requires that directors cooperate with the liquidator, supplying relevant information when it is requested. Non-compliance can lead to punishment via fine.
- Any unpaid employees who are owed an amount above that claimable from the National Insurance Fund, automatically qualify as preferential creditors, subject to the overriding preferential creditor limits.
- Any company under compulsory liquidation is dissolved automatically three months after the final return is registered.
Although it is true that liquidation may not be the most desirable outcome for a business, it does allow business owners to begin anew with no outstanding debt to carry into any future businesses. Because there are so many facets to member’s voluntary liquidation, creditors’ voluntary liquidation and compulsory liquidation, the importance of having the knowledge of an experienced professional by your side cannot be understated. If you are concerned about the future of your business, feel free to call one of our insolvency advisors at BCR for a confidential, no obligation chat.