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.
|
