What is a Creditors’ Voluntary Liquidation?
A Creditors’ Voluntary Liquidation is a legal process to formally wind-up an insolvent company’s affairs. Only a licensed Insolvency Practitioner may act as Liquidator.
The process allows all outstanding matters to be closed out, net funds to be distributed to creditors and the company’s dissolution.
The company’s insolvency is defined by either a cash flow or balance sheet test, as set out in the Insolvency Act 1986.
The board of directors will consider the company’s financial position and propose to shareholders that it be placed into liquidation. A meeting of shareholders is convened for this purpose.
The company is also required to provide creditors with an opportunity to either appoint the shareholders’ choice of Liquidator or nominate an alternative. Either a virtual meeting of creditors or the Deemed Consent procedure can be used for this purpose. Qualifying creditors are able to request a physical meeting.
Prior to the meeting of shareholders and the virtual meeting of creditors or decision date, the directors are required to send to creditors a Statement of Affairs together with a report which includes statutory information, historic financial results and a narrative statement summarising the company’s activities.
Upon the appointment of a Liquidator, the director’s powers cease and the liquidator becomes responsible for winding-up the company’s affairs. Directors have an ongoing duty to cooperate with the Liquidator and can be instructed to assist with the winding-up.
What are the duties of a Liquidator?
- Realise company assets for best value.
- Carry out a statutory investigation into the company’s affairs and the conduct of the directors.
- Submit information to the Insolvency Service’s Director Disqualification Unit.
- Identify and recover antecedent transactions.
- Discharge the costs of the insolvency process.
- Agree creditor claims and distribute surplus funds in accordance with the statutory order of priority.
- Report to creditors and shareholders within 2 months of each anniversary on the progress of the liquidation.
- Report to creditors and shareholders when the case is ready to be closed.
- File the Liquidator’s final report with Companies House.
When is the liquidation concluded and the company dissolved?
When the administration of the winding-up has been concluded, the Liquidator will take steps to close the liquidation.
A final report is issued to creditors and shareholders and filed at Companies House.
Once filed at Companies House, the Registrar will commence the dissolution process. The company will be dissolved approximately two to three months later.
When are the company’s books and records destroyed?
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