Chapter 7 - Voluntary liquidation Flashcards
What power of liquidator requires that notice is to be given to liquidation committee?
If liquidator disposes of any company property to a party connected with the company, they must give notice to liquidation committee
What are the powers of a liquidator?
- to make compromises/arrangements with creditor’s or claimants against company
- to bring legal proceedings under S213, 214 ,238, 239, 242, 243 or 423
- to bring or defend any action/legal proceedings in the name and on behalf of the compamy
- to carry on business as may be necessary
- to pay any class of creditor
- sell company property
- execute all documents
- claim in the insolvency of debtor individuals and companies
- appoint an agent
What are the restricted powers of a liquidator between members and creditors appointment of liquidator?
- to take custody or control all of the company’s property
- to dispose of perishable/wasting goods
- to do all things necessary for the protection of the company’s assets
MVL
Meeting of Board of Directors - what actions are decided/passed?
- recommend MVL to the members
- authorise the calling of the GM
- select a director to call the GM
- authorise the swearing of the DoS
- to provide the liquidator with an indemnity for early distribution to shareholders
MVL
What is the notice period for the GM?
What percentage need to agree to waive the notice?
14 days notice of the GM must be sent to all members unless the company articles specify a longer period.
Notice can be waived if at least 95% of those entitled to attend and vote are in favour (90% if a private company)
No requirement to advertise the GM
MVL
What is often the quorum for a GM?
Will be stated in the Company’s articles of association, usually 2 unless it is a single member, then will be reduced to 1
MVL
At the GM, what special resolutions are usually passed?
What is the % for passing them?
Special resolution to wind up the company
Special resolution sanctioning the distribution of assets in specie
Special resolution sanction the exercise of the liquidators powers
75% majority or more of the votes cast at the meeting
MVL
At the GM, what ordinary resolutions are usually passed?
What is the % for passing them?
- ordinary resolution to appoint a liquidator
- ordinary resolution regarding the basis of the liquidators remuneration
Simple majority of over 50% to pass
Where do the Directors resolutions need to be filed and what is the time period?
15 days to file resolution to wind up at CH
14 days to advertise resolution to wind up at Gazette
MVL - 15 days to file DoS with CH
CVL - 5 business days to file SoA
Where does resolutions of liquidator need to sent to and what is the time period?
Notice of liquidators appointment must be :
Advertised in 14 days
Sent to creditors within 28 days
Sent to CH within 14 days
When must declaration of solvency be made? and who does it need to be sworn by?
Declaration of solvency must be made within 5 weeks preceding the date of the passing of the resolution to wind up
If there are two directors, must be sworn by both, if more than two directors, then must be sworn by majority.
Declaration must include details of the company’s assets and liabilities as at the latest practicable date before its making.
S89 what must the declaration of solvency state?
that the directors have:
- made a full enquiry into the company’s affairs
- formed the opinion that the company will be able to pay its debts in full, together with interest at the official rate,
- within such period, not exceeding 12 months from the date of commencement of the winding up.
This includes detailing stat interest for known creditors and a provision for the costs of winding up.
If liquidator becomes aware MVL is no longer solvent, what must they do?
within 7 days of forming opinion that company is insolvent send a statement to creditors as to the affairs of the company
use an appropriate decision procedure to secure appointment of a liquidator in what is now a CVL, must give 14 days notice of decision procedure
Can a liquidator of an MVL that has become insolvent, take the appointment for the CVL?
should consider Insolvency Code of Ethics
- if there has been no significant personal relationship and due consideration paid to ethics, IP can usually accept appointment
- if there as been a significant personal relationship and the IP is of opinion that the company will eventually return to solvency, they may usually accept appointment. HOWEVER, if subsequently appears will not return to solvency then they should resign as liquidators.
IF IP does not believe the company will return to solvency, he should not accept appointment as liquidator.
Dissolution - value of capital that can be drawn under the concession rule, what does this mean?
Up to £25,000 will be treated as capital distribution rather than income for a distribution on dissolution of a company
Dissolution of company - conditions for concession to apply
The company must assure HMRC that it:
- does not intend to trade or carry on business
- intends to collect its debts, pay off creditors and distribute balance to its shareholders (or has done so)
- intends to strike of and dissolution
Disadvantages to dissolution
- application can be made by aggravated person to restore to register
- risk of missing creditors, liquidator has power to advertise
- not possible to distribute in specie
- ## right to pursue unlawful distributions will vest bona vacantia, capital needs to be lawfully distributed
Advantages to dissolution
-Cheaper than MVL
- Quicker (min 3 months)
- Don’t have to do DoS which if proven false carries penalty charges
- No tax disadvantage if distribution does not exceed £25,000
How long do parties have to apply to court to restore Companies struck off register?
within 6 years of dissolution
Period is extended to any time in the case of a person seeking restoration to pursue damages for personal injury
CVL
What is the usual notice period for a General Meeting?
Can it be waived, if so what percentage?
14 days notice of GM must be given to members
21 days if the meeting is a public Company AGM
Can be waived by 95% of members if public company and 90% if private company.
CVL
What notice period for winding up must be given to Qualifying Floating Charge holders for GM?
5 business days
CVL
What is the time period to file the Statement of Affairs at Companies House?
5 business days
CVL
If either members or the creditors are unhappy with the appointed liquidator, they can make an application to court within what time period?
7 days
What is the function of a liquidation committee?
Assisting the liquidator in his functions
Fix liquidators remuneration
Supervise conduct of liquidator
Receive notice that liquidator intends to dispose of property to persons connected with the company
When is the first liquidation committee meeting held?
First meeting to be held within 6 weeks of the establishment of the committee.
After the first liquidation committee, how quickly must a meeting be held after a request?
21 days or for a specific date where the committee previously resolved that a meeting be held on that date
What notice period of the venue for a liquidation committee must be given?
5 business days (7 business days if held remotely)
How many members of the liquidation committee need to be present for the meeting to be duly constituted?
At least 2 members
A Liquidator can send out a resolution by correspondence to the members of the creditors committee - within how many days can a member request a a meeting?
5 business days from date of liquidator sending out resolution
CVL - creditors decision procedure, how much notice do you have to give creditors?
3 business days
and cant be any more than 14 days from the date of the resolution to wind up
CVL - when must the statement of affairs be delivered to creditors?
No later than the business date prior to decision procedure
CVL - notice of the creditors must be advertised within what timeframe?
As soon as possible
