Process for CVL
The liquidation process is started by the directors. At a board meeting they pass a resolution that the company is insolvent and instruct an insolvency practitioner’s firm to assist the directors with the steps required to place the company into CVL.
The steps will include the convening of the required meeting of shareholders and a decision procedure for creditors.
Meeting of shareholders
A meeting of shareholders is held pursuant to section 84 of the Insolvency Act 1986. The meeting considers a special resolution that the company cannot, by reason of its liabilities exceeding its assets, continue its business and that it is advisable to wind up. The special resolution requires a majority of 75% of those present and voting in person or by proxy. The shareholders also nominate a liquidator. This requires an ordinary resolution passed by a simple majority of more than 50% of those present and voting.
Where there is a holder of a qualifying floating charge, before a company passes a resolution for voluntary winding up, it must receive notice of 5 working days.
Decision Procedure for Creditors
Following the meeting of shareholders, the creditors are given the opportunity to consider the appointment of an insolvency practitioner either by a deemed consent procedure or by holding a virtual meeting of creditors.
Creditors will be sent a notice detailing the resolution to appoint the liquidator together with a copy of the Statement of Affairs of the company. The creditors will be advised of the day on which the resolution will deemed to be passed (this will usually be the day of the members meeting). The notice must be delivered to creditors 3 business days before the date the resolutions are deemed to be passed. Best practice determines that two weeks’ notice is normally provided to creditors. The creditors will be informed that they have the right to object to the deemed consent. If creditors object then a physical meeting will need to be called to seek a decision from creditors on the nomination of a liquidator. If creditors do not object then the resolution is deemed passed.
Virtual Meeting of creditors
The virtual meeting is usually held on the same day as the shareholders’ meeting. The purpose of this virtual meeting is to nominate a liquidator and a committee. If, however, a committee is not formed the creditors will also be asked to approve resolutions relating to fees.
Directors often rely upon professional advisers when making the decision to wind up and the steps to be followed once the decision has been made.
Notice of the virtual meeting of creditors together with the Statement of Affairs of the company is delivered to creditors not less than three business days’ before the virtual meeting is held. Best practice determines that two weeks’ notice is normally provided to creditors. The notice of the creditors’ virtual meeting is advertised in the London Gazette and, if thought necessary, in a local newspaper. The creditors will be informed that they have the right to object to the virtual meeting. If creditors object then a physical meeting will need to be called.
In the event that objections are received by creditors about either the deemed consent procedure or the virtual meeting it will be necessary for a physical meeting to be called.
Once the criteria to call a physical meeting has been met then a physical meeting of creditors needs to be held within 14 days. The notice calling the physical meeting must be delivered at least 3 business days before a meeting may be held. The notice of the creditors’ meeting is advertised in the London Gazette and, if thought necessary, in a local newspaper.
Action to be taken between the calling of shareholders meeting/notice of decision procedure and the appointment of a liquidator.
Once the decision has been made to wind up the company, it would normally cease to trade. The directors retain their powers of management and have certain statutory obligations. These obligations include the preparation of a statement of affairs, which must be signed as a Statement of Truth by some, or all, of the directors. The statement is sent to creditors in advance of the deemed consent procedure or the virtual meeting and is lodged at Companies House. The directors will be requested to provide information on the company’s history and trading, including reasons for the deficiency shown on the statement of affairs.
Payment for this work is made from the company’s assets if funds permit. If no funds are available the directors, or a third party would be expected to pay these costs.
Once the Liquidation appointment has been made
- Notify all relevant parties about the liquidation appointment
- Communicate with all creditors from start to finish
- Instruct agents to collect and safeguard any assets that may be at risk
- Realise all company assets including book debts
- Assist employees in submitting their potential claims to the Redundancy Payments Service
- Submit a report to the Secretary of State for Business Innovation and Skill on the conduct of directors
- Deal with any company pension scheme
- Agree creditors’ claims and make distributions to creditors
- Prepare all statutory reports and take steps to close down the liquidation in a timely fashion
- Deal with all paperwork relating to the Company
Umbrella’s team of experts have a broad range of experience in commercial liquidations. For a free and strictly confidential consultation contact a member of the team. Call: 0800 611 8888 or email us.