Your Questions on Liquidations
What is a Members Voluntary Liquidation (MVL)?
An MVL is a solvent liquidation where the assets of the company are sufficient to settle all debts of the company in full, within 12 months of the commencement of liquidation. As creditors will be paid in full, this form of liquidation is controlled by the members of the company and is usually not hostile.
What meetings need to be held?
Firstly, a directors’ meeting to resolve to convene the necessary meetings for the purposes of placing the company into liquidation, followed by a meeting of the shareholders.
What is a declaration of solvency?
A declaration of solvency is a statement of assets and liabilities, which must be sworn by the directors of the company stating that, in their opinion, the company will be able to pay its debts in full within a period of 12 months.
Do any notices need to be served prior to the liquidation?
Before a company passes a resolution for voluntary winding up, the company must give written notice of the resolution to the holder of any qualifying floating charge allowing them five business days to consent to the liquidation.
What are duties of a MVL liquidator?
The liquidator will be required to realise the maximum value for the assets and distribute these funds between the creditors and members of the company, in that order.
What happens if later, the company is not actually able to pay creditors in full?
The liquidator is required to hold a meeting of creditors for the purposes of converting the MVL to a Creditors Voluntary Liquidation (CVL).
What are the consequences for the directors if the company is subsequently placed into CVL because it is unable to pay creditors in full?
The liquidator will be required to carry out an investigation into the directors’ conduct and, in particular, look at whether or not the initial declaration of insolvency was made on reasonable grounds. If the liquidator finds that it was not made on reasonable grounds, the directors could be liable to a fine or imprisonment or both.
|
