The creditors voluntary liquidation process is one that is relatively straight forward once the process has been started by the directors of the company.
The company liquidation procedure is started by the directors, they tell the shareholders the company is no longer viable, it cannot meet creditor payments and or it has threats of legal action.
The directors realise that the company is insolvent and they must stop trading. The shareholders then ask a licensed insolvency practitioner to call a creditors meeting as soon as possible (this can be done online, by phone or in person. This must be not less than 14 days notice, but it is usually 21 or so days.
In the past, the nominated liquidator (who must be a licensed insolvency practitioner) asked the directors for a list of all known creditors and he or she wrote formally to them with a creditors meeting notice (see here for examples of creditor meeting notices). Physical meetings are no longer mandatory by law, therefore the process is now slightly different but the meeting still takes place - whether it is online or over the phone. The IP will guide you through this process. The meeting of creditors is usually a simple short meeting with no one attending and can be done online or by phone conference. From April 2017 though a physical meeting of creditors will not be summoned unless this is explicitly requested by at least the following;
- 10% by value of creditors or
- 10% in total number of creditors or
- 10 individual creditors
The liquidator will be approved by what is termed deemed consent unless is met with objection from at least 10% of creditors (in value or number). If there is an objection then a vote will need to be held.
So, this is why it's called Creditors Voluntary Liquidation. It's very common, quick and a very powerful way to close a business and deal with things properly. You can get on with a new business or job, the company is closed, leases cancelled and all the staff made redundant.
What does a liquidator do?
He or she runs" the liquidation, fills out all the forms, calls all meetings and investigates the conduct of the directors before the liquidation happened. He collects assets and turns them into cash. He then works out the debts and pays the creditors from the assets, if there were any.
This is called paying a dividend to creditors. Often the dividend is very little or zero. This is because assets tend to be sold for small amounts of money by liquidators as there are very few buyers.
What do we do as directors?
Once the company is "in liquidation" the directors have to fill out a detailed questionnaire for the liquidator. They MUST provide all of the company's books and records to the liquidator. After this there is a creditors' meeting which a director must attend. After that, very little else usually.
You must comply with the liquidators request for information, it is a criminal offence not to do so.
You may be able to claim redundancy pay (if you are a director who gets paid a salary through PAYE) as well as holiday pay and unpaid wages, however there are exceptions to this. Please call us on 08009700539 to talk through your options.
Can I start another company with the same name?
This is a very common question and we would always advise that directors should take great care. You must not trade with a similar name as the previously liquidated company without careful legal advice. Breaching s216 Insolvency Act 1986 is a possible criminal offence. We can guide you through this possible minefield.
Can I become a director of another company if my company is liquidated?
Yes! Don't worry, you can be a director of another company (remember s216 above). But always act properly, don't take chances and think you are a smarter than the law. You aren't, lots of people think they are and end up in personal financial trouble. Call us now, ask all the questions you want for free. Call now for advice on 08009700539.
Summary: ACT NOW while you still can!
If the business has no future and very little cash, debtors or small asset values, get it into liquidation BEFORE it runs out of cash and assets to pay for the liquidation.
This is the common failing of many directors, they think something will turn up and fail to act soon enough. Their business ends up with no assets and the company ends up facing winding up petitions This is more risky for the directors than voluntary liquidation.
If you would like to find out more as well as get answers to legal and insolvency issues, request our FREE 40-page guide for worried directors.