An overview of the company liquidation process:
There will be an initial meeting with a Licensed Insolvency Practitioner who will advise on the current situation of the company and whether there are any alternatives to company liquidation. Should a company liquidation be the desired route then the Insolvency Practitioner will request that a Board Meeting is convened for the purpose of putting the company in liquidation.
At the Board Meeting the Directors of the company convene a meeting of shareholders meeting and a meeting of creditors.
A notice is then sent out to shareholders notifying them of the time, date and place of the convened meeting. The timescale for this is a minimum 14 days notice, however notice of the meeting can be waived by an effective resolution with 95% or 90% (depending on the Articles of Association) consent of members.
Creditors also require notice for a meeting, which is also known as a Section 98 Meeting of Creditors, this meeting requires a minimum notice of 7 days. This creditors meeting must also be held within 14 days of shareholders meeting, in practice this is usually held the same day of the company liquidation.
At the Shareholders Meeting (also known as the Members Meeting) the purpose of the this meeting is to pass the necessary resolution to wind up the company and to appoint a liquidator. The shareholders will also receive a report of the directors and a statement of affairs of the company, the shareholders are also free to ask the directors any questions regarding the trading of the company and the reasons leading up to the demise. Once the shareholders pass the resolution to wind up the company, the company is then formally in liquidation.
At the Creditors Meeting, the purpose of this meeting is to ratify the appointment of the members appointed liquidator or request the appointment of another (who must be willing to act), resolutions are also passed on how the liquidator is to be remunerated. The creditors will also receive a report of the directors and statement of affairs of the company, and are free to ask the directors any questions regarding trading of the company and the reasons leading up to the demise, as per the shareholders meeting.
The company is now in liquidation and a liquidator has been appointed.
After both of the above meetings the liquidator will notify all shareholders, creditors and the Registrar of Companies of the company liquidation, in addition the liquidator will place a number of adverts in the London Gazette.
It is now the duty of the liquidator to maximise the realisation of assets. The way in which this is done is by selling all the available assets. Assets include; stock, motor vehicles, computer equipment, plant & machinery, office furniture & equipment, work in progress, etc, etc. The liquidator will also collect in any of the book debts, investigate into the actions of the directors, identify if there are any causes for wrongful trading or fraudulent trading, whether any antecedent transactions have taken place like preferences or transactions at an undervalue.
The liquidator will deals with all employee claims that arise from when the business has ceased trading and a number of claims are made for redundancy, outstanding pay (arrears of pay), holiday pay, and pay in lieu of notice, this can only be done once the company is in liquidation.
The liquidator will also deal with all creditor claims, the onus is upon the creditor to submit a form known as a proof of debt, which is a document that details how much is owed by the company. Should a creditor fail to submit a proof of debt then when a dividend becomes payable the creditor may be excluded from receiving this dividend. It may be the case that the liquidator will not agree any claims until a dividend is payable, owing to the time it takes to go through the claims whereby there is insufficient funds to discharge the liquidators remuneration.
During the company liquidation process if there is sufficient funds to pay a dividend to creditors, the liquidator will pay a dividend on the agreed claim equal to the amount owed across all creditors in the same class also know as pari passu i.e. 25p in the £.
The liquidator will produce an annual progress report detailing what has actions that the liquidator has taken in the year of the company liquidation.
Once the liquidator has finalised all matters and produced a final account of his dealing then he will issue a final report, hold a final meeting for his release from office as liquidator so that the company can then be dissolved.
All the above is a very overview of the company liquidation process if you want further details on how to liquidate your company or just have any general queries please do not hesitate to contact inquesta.