If you are looking to close your company, regardless of whether it is solvent (i.e. has more assets than liabilities) or insolvent (i.e. unable to pay liabilities as they fall due), a voluntary liquidation allows you to legally wind up the affairs of your company and ensure any assets are distributed appropriately.
If you are looking to close your solvent company, you should look to place your company into a members’ voluntary liquidation (MVL).
If you are looking to close your insolvent company, you should look to place your company into a creditors’ voluntary liquidation (CVL).
Who Initiates The Voluntary Liquidation Process?
Usually, the first steps of the voluntary liquidation process are initiated by the board of directors.. It is the board of directors who will formally decide to convene a meeting of shareholders with a view of passing a resolution to place the company into voluntary liquidation.
The directors will provide formal notice of an extraordinary general meeting to all shareholders pursuant to the company’s articles of association. Modern-day articles usually require at least 14 days’ notice to be provided to shareholders, albeit shareholders may agree to hold the meeting at short notice to speed up the process.
For both an MVL and a CVL, it is the shareholders who pass the resolution to place the company into liquidation. However, for a creditors voluntary liquidation process to begin, all known creditors must also be given notice of the proposed liquidation and they will have the opportunity to nominate their own insolvency practitioner to oversee the liquidation. It should be noted that creditors cannot stop the company entering liquidation at this stage, they can merely influence which firm administers it.
What Happens Before The Meeting Of Shareholders?
Prior to the meeting of shareholders, the majority of directors must prepare and approve further information in accordance with the relevant insolvency provisions.
For an MVL, the majority of directors must swear a Declaration of Solvency in the presence of a solicitor. This declaration will be accompanied by a statement of assets and liabilities that will prove the company’s assets are greater than its liabilities.
For a CVL , additional steps must be taken. After the notice of the extraordinary general meeting has been issued to shareholders, or at the same time, notice will also be provided to all known creditors of a decision procedure. This will either be a virtual meeting or a deemed consent process. The main purpose of this decision procedure is to give creditors the opportunity to request a physical meeting, elect to form a liquidation committee and/or make their own nominations as to who should be appointed as liquidator.
Furthermore, for a CVL, the majority of the directors are required to prepare and sign a Statement of Affairs that sets out all of the company’s assets and liabilities. An information pack providing an additional narrative regarding the company’s affairs must also be prepared. This Statement of Affairs and additional information pack must be provided to creditors prior to the decision procedure referred to above.
The Meeting Of Shareholders
As mentioned above, the main purpose of the meeting of shareholders is to pass the necessary resolution to place the company into voluntary liquidation. The shareholders will also appoint their preferred insolvency practitioner as liquidator (the ‘members nominated liquidator’).
Throughout a members’ voluntary liquidation process, the insolvency practitioner who is nominated as liquidator will maintain their position for the duration of the entire process.. In a creditors’ voluntary liquidation, the members nominated liquidator will either act for the duration of the process or until such time as the creditors opt to nominate an alternate insolvency practitioner.
The Creditor Decision Procedure (For Creditors Voluntary Liquidations Only)
Insolvency provisions allow the decision of creditors to be made by either a virtual meeting or via deemed consent. There is no set rule as to which voluntary liquidation process to use and each has their own advantages. An insolvency practitioner will be able to guide you as regards the most appropriate voluntary liquidation process to implement depending upon the circumstances.
A virtual meeting will typically take place via a conference call or video call. A director will act as chair of the meeting and the members nominated liquidator should be present. Creditors will be guided through the financial information provided to them and given the opportunity to ask questions of the directors before voting upon the stipulated resolutions.
The deemed consent process does not require the input of creditors. The notice to creditors simply states that the company will enter voluntary liquidation on the specified date and that the members nominated liquidator will be appointed as liquidator unless a sufficient number of creditors object within the prescribed period.
If the deemed consent process is objected to by a sufficient number of creditors, or the prescribed number of creditors make a formal request for a physical meeting, the decision procedure will be cancelled, and the directors (via the insolvency practitioner) will then be required to convene a physical meeting of creditors. The proceedings at this meeting will be broadly the same as the virtual meeting. The powers of the liquidator are limited until the creditors’ decision procedure, or physical meeting, is concluded.
What Is The Role Of The Insolvency Practitioner In The Pre-Liquidation Process?
The role of the insolvency practitioner in the pre-liquidation process is to provide advice to the directors and to assist them in all aspects of placing the company into voluntary liquidation if this is the most appropriate process for the company.
At MyLiquidation, we aim to make sure the advice and service we provide is simple, fast and reliable. Our experienced team will guide the directors and shareholders through every step of the voluntary liquidation process, from setting up the initial board meeting to guiding directors through the final creditor decision procedures. In short, you will be in safe hands with MyLiquidation’s team of licenced insolvency practitioners.