5.3 Members Voluntary Liquidation Flashcards
Which SIPs don’t apply in an MVL?
SIP 2 - Investigations/ submission of conduct reports
SIP 13 - Disposals of assets to connected parties
What are the important points for an MVL?
Company must be able to pay all of its creditors in full, with interest, within 12 month from the resolution to wind up
Technically, this is not necessarily“solvency”
Placed into liquidation by resolution of members
Liquidator has duty to settle any outstanding creditors
In most (but not all) cases liquidator will distribute surplus to shareholders
Distributions may be in cash (dividends) or in assets (“in specie”)
Tax issues should be reviewed before liquidation
What is the purpose of a board meeting?
Minute reasons for liquidation
Instruct notice to members of general meeting or of written resolutions
Approve a declaration of solvency
Appoint director to chair members’ meeting
How much notice must be given of proposed resolution to any QFCH?
5 business days
Written notice of proposed resolution to wind up must be given to any qualifying floating charge holder (QFCH)
QFCH can appoint own choice of administrator.
Winding up resolution can be passed only:
if person who received notice has consented in writing; or
Prior notice of resolution to QFCH and 5 business days have passed since notice given
What is the Declaration of Solvency?
S89 IA86 Declaration of Solvency (DoS)
The directors (or a majority of them) may at a directors meeting make a statutory declaration to the effect that they have made a full inquiry into the company’s affairs and that, having done so, they have formed the opinion that the company will be able to pay its debts in full, together with interest at the official rate….
What info must be included in a Declaration of Solvency (DoS)?
R5.1(1)
the name and a postal address for each director making the declaration
That all or a majority of them, having made full enquiry, have formed the opinion that the company will be able to pay its debts in full, with interest, within a period not exceeding 12 months
that the declaration is accompanied by a statement of the company’s assets and liabilities as at a date which is stated (being the latest practicable date before the making of the declaration).
What must the statement of affairs that accompanies the DoS include?
b) a statement that the statement shows the assets of the company at estimated realisable values and liabilities of the company expected to rank as at the [latest practicable date]
….
f) the estimated costs of the winding up and other expenses;
g) the estimated amount of interest accruing until payment of debts in full;
h) the estimated value of any surplus after paying debts in full together with interest at the official rate.
What is the directors’ responsibility for the Declaration of Solvency?
Must have reasonable grounds for opinion that all creditors will be paid in full within period they specify
If statement made without reasonable grounds, the director liable to imprisonment, or a fine, or both
Presumed directors did not have reasonable grounds for opinion if debts not paid in full in period specified
To what date must the Declaration of Solvency be made
How is it authenticated?
Date verified must be not more than 5 weeks before date of liquidation
(= members’ resolution to wind up)
Declared in person in front of a solicitor, a notary of the public, or other authorised person, such as a commissioner for oaths
When must the declaration of Solvency be delivered to CH?
before the expiration of 15 days immediately following the date on which the resolution for winding up is passed
(= members’ resolution to wind up)
What rules apply when calling the members meeting?
Company’s articles take priority over CA 06 where differ
How much notice must be given to members of general meeting (to resolve to wind up the company)?
Minimum 14 days notice
Members can agree to short notice of less than 14 days
Short notice requires resolution by majority in number plus:
90% in value for a private company; or
95% in value for a PLC
of members entitled to attend and vote
Must advise members of their right to appoint a proxy.
Other than members ， who else must be sent notice of the meeting?
directors
company’s auditors
What is the quorum for the members’ general meeting (a CA 06 meeting)?
2 members to be present (in person or by proxy)
unless single member company.
Must be chaired by a director
Check articles for ability to hold remote meetings.
What resolutions are required, and what majority is required?
Voting on basis of number of shares, or as set out in company’s Articles
SPECIAL resolution to WIND UP
requires 75% members at meeting to vote for it
ORDINARY resolution to APPOINT LIQUIDATOR
requires 50% members at meeting to vote for it
When does a MVL commence?
At the time of passing of the resolution for voluntary winding up. (Meeting)
Where written resolution: when the required majority (75%) have signified their agreement to it = date of liquidation
When can a company enter MVL by written resolution?
Private company only (not plc)
Notice required to auditors and any QFCH
S296CA06:Passed when the required majority (75%) have signified their agreement to it = date of liquidation
Additional resolution authorising a director to sign the Certificate of Appointment
What are the contents of the Certificate of appointment?
(IP Must provide written consent before appointment.)
Signed by chairman of meeting OR person authorised by written
Evidence of appointment of liquidator
What is the effect of an MVL?
Cease to carry on its business, except so far as is required for its beneficial winding up
Corporate state and corporate powers of company continue until dissolution
What must be gazetted, and in what time frame?
Members’ resolutions
Notice of Appointment
Within 14 days
No power to advertise otherwise at liquidator’s discretion
What must be filed at CH, and in what time frame?
Members’ resolutions
Notice of Appointment
Within 14 days
How long does the liquidator have to deliver notice of his appointment to creditors of the company?
28 days
What happens with respect to creditors?
Creditors to be settled before shareholders
Usual practice to advertise for claims with statutory notification of
appointment
Entitled to interest at the official rate, from the date of commencement
Payment in full within period per DoS
When should OH obtain tax clearance from HMRC?
Before distribution to shareholders?
What notice is required of distribution to share holders?
NO notice requirement
What happens when MVL liquidator forms the opinion that the company will be unable to pay its debts in full?
Before end of period of 7 days beginning with the day after the day on which the liquidator formed opinion make out statement of affairs
What happens to the liquidator where MVL to CVL?
The creditors may nominate a [an alternative] liquidator and the [existing] liquidator MUST invite them to do so
R6.11:Liquidator must convene a deemed consent or decision procedure
The notice must also contain —
identification and contact details for the existing liquidator; and
a statement that if no person is nominated by the creditors then existing liquidator will be liquidator
Be accompanied by a copy of the SofA
Usual rules re: decision notices/ objections apply
How many days from when the liquidator forms an opinion that MVL should be CVL does the liq have to give notice to creditors & when must the decision date be?
Creditors must receive 14 days notice
Decision date not later than 28 days from opinion
(NB no notice etc to members)
What happens if sought nomination by deemed consent but more than 10% in value object?
Decision date to be ASARP but no later than 28 days from date of objection threshold met
7 days notice to creditors required
When does an MVL convert to a CVL?
From the date:
the company’s creditors nominate a person to be liquidator, or
the procedure concludes without a nomination having been made
How long do creditors have to propose an alternative IP once they receive notice of decision by correspondence or e voting?
five business days of the notice to creditors
Liquidator then has 2 days to convene a decision procedure
What happens if a physical meeting is requested?
Where creditors request a physical meeting, the decision date must be:
within 28 days of the date on which the threshold for requiring a physical meeting was met; and
on at least 14 days’ notice
What happens if the creditors nominate another liquidator & another creditor, director or member objects?
Any director, member or creditor of the company may, within 7 days apply to court
How long does the liquidator have to deliver notice of the conversion to CVL to creditors?
28 days
How long does the liquidator does the liquidator have to file the SA after the completion of the DMP?
5 Business days
