This is a voluntary, insolvent liquidation. A company is insolvent if:
- Cannot meet its debts as and when they fall due OR
- It’s liabilities are greater than its assets
The procedure is straightforward:
- The directors resolve to place the company into voluntary liquidation
- They summon a meeting of the company’s shareholders
- The shareholders resolve to place the company into liquidation.
- The shareholders appoint an Insolvency Practitioner as liquidator.
- The directors summon a meeting of the company’s creditors
Since this is an insolvent liquidation, the creditors can appoint their own liquidator in place of the shareholders choice. The creditors are therefore in "control" of the liquidation and are able to ask the liquidator to, for example, investigate matters concerning the company, its trade and its affairs more generally.
The liquidator will:
- Take control of the company and its assets
- Investigate why the company has failed
- Agree the claims of creditors
- Sell the company's assets and distribute the proceeds to creditors
- Apply to the Registrar of Companies to have the company dissolved
The impact on the directors is straightforward:
- The directors hand over control to the liquidator but they remain in office as directors
- The liquidator is under duty under the Company Directors’ Disqualification Act 1986 to submit a confidential report on the conduct of directors to BERR
- The directors may be liable for any personal guarantees they have given
Directors should always consult a Licensed Insolvency Practitioner as soon as they become aware that their business is in financial difficulty.
Gore and Company can help in a variety of ways:
- We can complete a rapid review of the business and advise on the most appropriate course of action
- We can assist you to place the company into liquidation in an efficient and cost effective manner