What Is The Meeting Of Shareholders In Liquidation?
If a company is planning on entering liquidation, it’s essential that the decision is approved by the majority of shareholders. This is the role of the meeting of shareholders, to vote on whether or not the liquidation can go ahead and to vote on key aspects of the process, such as appointing a liquidator. Let’s take a closer look at the preparation required for the meeting of shareholders, the structure of the meeting itself, and it’s significance for the wider liquidation process.
What Happens Prior To The Meeting Of Shareholders?
Before the meeting of shareholders can take place, directors must prepare and approve the relevant information, in line with the procedures set out by insolvency law. This will involve different responsibilities depending on whether it is a Members’ Voluntary Liquidation (MVL), or a Creditors’ Voluntary Liquidation (CVL). An MVL is the process for liquidating a solvent company, and so as part of the preparation for the meeting of shareholders, directors must sign a Declaration of Solvency, proving that the company’s assets are greater than it’s liabilities.
A few more additional steps are involved in a CVL. At the same time as notice of the liquidation is provided to shareholders, notice must be provided to creditors. This is to give creditors the opportunity to request a meeting, and to put forward their own nominations as to who should be appointed liquidator, should they choose to do so. In a CVL, directors are also required to sign a Statement of Affairs that details the company’s assets and liabilities, to be provided to creditors.
How Does The Meeting Of Shareholders Take Place?
Once the necessary steps in the pre-liquidation process have been taken, as listed above, the timeline for the meeting of shareholders is as follows:
- Directors call an extraordinary general meeting, giving shareholders typically 14 days notice of the meeting (unless a consent to holding the meeting at short notice is received)
- For the resolution to wind up the company to be passed, 75% of shareholders present must vote in favour of winding up the company
- The resolution is filed with the Companies House within 15 days of the meeting
- Notice of the resolution to wind up the company must be advertised in The Gazette within 14 days
What Is The Purpose Of The Meeting Of Shareholders?
The primary purpose of the meeting of shareholders is for the resolution to wind up the company to be fairly voted upon by shareholders. The meeting ensures the decision is fair to all main parties involved in the business. However, the meeting of shareholders is also used to appoint a licensed insolvency practitioner to act as liquidator. The appointed liquidator will take control of the company’s assets and direct the company on the best path that is fair to all interested parties. It is important to note here that the initial liquidator is appointed by the shareholders, albeit a creditor can nominate a different insolvency practitioner to replace them.
To summarise, the meeting of shareholders is a crucial aspect of the liquidation process .It determines whether or not the resolution to wind up the company will be passed, and decides who will be appointed liquidator.
If you are the director or shareholder of a company that is considering liquidation, please don’t hesitate to contact our experienced team of insolvency practitioners at My Liquidation for confidential advice.
