Creditors Voluntary Winding Up

A Creditors Voluntary Winding Up is entered into when the company is insolvent. In other words, it cannot pay its debts as and when they fall due. The directors of the company will have agreed that it is advisable they seek professional advice. In the first instance the auditor or company solicitor may assist and will then refer them to an Insolvency Practitioner. Alternatively they can contact an Insolvency Practitioner directly.

INSOLVENCY PRACTITIONER
An Insolvency Practitioner is usually an accountant, but occasionally a solicitor, who is licensed to act in matters of insolvency under the Insolvency Act 1986.

DIRECTORS MEETING
Following the decision to meet with an Insolvency Practitioner, the Directors will normally, at that meeting resolve that the company be wound up and necessary meetings are convened.

SHAREHOLDERS MEETINGS
This is the first meeting convened, following the Directors meeting. All shareholders must receive due notice which is normally 14 days. At this meeting a Liquidator of the company is appointed. This will usually be the Insolvency Practitioner who will be assisting in convening meetings and preparing the Statement of Affairs.

CREDITORS MEETING
This meeting is normally convened for the same day as the shareholders meeting. All known creditors of the company must be circulated with a formal notice of the meeting and a proxy form entitling them to attend and vote.

They must have at least 7 days notice. More normally 14 days notice is given. Following presentation and discussion regarding the Statement of Affairs, the creditors present, either in person or proxy, will vote on the appointment of the Liquidator. It is possible to overturn the Liquidator appointed by the shareholders, by an alternative nomination obtaining a clear majority.

STATEMENT OF AFFAIRS
During the period of time between the convening of the shareholders and creditors meetings and the holding of these meetings, a Statement of Affairs is prepared. This sets out the assets and the liabilities of the company and gives an indication of the likely deficiency that will be suffered by any fixed charge holders, any floating charge holders, preferential and unsecured creditors. It must be sworn by the Director(s).

LIQUIDATION COMMITTEE
This is a committee of 3 - 5 creditors, or their representatives, who are appointed at the Creditors Meeting. It is their duty to assist the Liquidator in any way they can and to sanction the activities of the Liquidator.

ASSETS OF THE COMPANY
The assets of the company vest in the Liquidator immediately upon appointment and it is the duty of the liquidator to realise these for the benefit of the different classes of creditor.

REPORT
During the first six months after the date of Liquidation, the liquidator has a statutory duty to report to the Department of Trade and Industry on the conduct of the Director(s).

DEBENTURE HOLDER
Many banks, secondary lending institutions and individuals, when they advance a company money will ask for a Debenture. This gives them security over some or all of the assets of the company and an advantage over the creditors. The liquidator will validate the debenture before discharging the debenture holder's debt. The debenture holder may appoint an Administrative Receiver to deal solely with the assets covered by his debenture.

PERSONAL GUARANTEES
In addition to the debentures requested by Institutions nowadays personal guarantees are often required. Personal guarantees may also have been given by the directors in respect of other liabilities, most often leasehold equipment. It will be up to the director to deal with the personal guarantees if the Liquidator is unable to raise sufficient funds from the realisation of the assets to cover any short fall.

 
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Tel: 01753 883315
 
Email: insol@phillipsinsolvency.co.uk
 
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