OUR INSOLVENCY AND RESTRUCTURING SERVICES FOR COMPANIES
CREDITORS VOLUNTARY LIQUIDATIONS ("CVL")
DESPITE THE NAME "CREDITORS", IT IS THE DIRECTORS THAT DECIDE TO PLACE A COMPANY INTO CREDITORS VOLUNTARY LIQUIDATION
For a controlled wind down of the business, when the company is unable to pay its debts as when they fall due. This process usually results in the closure of the business, however the assets and/or business can be sold to a new or different Company. As such the a CVL can be used for a pure exit from the business or for a "Phoenix" scenario. It is popular for its cost effectiveness and ability to write off debts.
THE PROCEDURE
The liquidation process is started by the directors who pass a board resolution for the Company to be wound up voluntarily and agree the date, time and venue of the meeting of shareholders and deemed consent procedure or virtual meeting for creditors.
Meeting of shareholders
The meeting considers a special resolution that the Company cannot, by reason of its current and/or impending liabilities, continue its business, and that it is advisable to wind up.
A company goes into CVL if its members pass this special resolution for its winding up, with a majority of at least 75% of those present and voting in person or by proxy (section 84, IA 1986 and section 283, Companies Act 2006). The members also nominate an insolvency practitioner to act as liquidator. This requires an ordinary resolution passed by a simple majority of more than 50% of those present and voting The liquidation is deemed to commence from the passing of the resolution (section 86, IA 1986). After its members resolve to wind it up, the company's creditors may nominate a person to be a liquidator.
Deemed consent or Virtual meeting of creditors
From 6 April 2017 there will no longer be a meeting of creditors following the removal of section 98 of the Insolvency Act 1986 (“IA 1986”). A liquidator will be appointed under the amended section 100 of the IA 1986 and rule 6.14 of the IR 2016.
The directors must deliver a notice to creditors seeking their decision on the nomination of the liquidator under section 100 of the IA 1986 and rule 6.14 of the IR 2016 by the deemed consent procedure or a virtual meeting. The notice must contain the information required in rule 6.14(8) of the IR 2016 and rules 15.7 (deemed consent) and 15.8 (notices to creditors of decision procedure) of the IR 2016. The decision date must be no earlier than three business days after the notice is delivered and no later than 14 days after the resolution is passed to wind up the company.
The directors of the company must prepare a statement of affairs within seven days after the day of the members' resolution and send the statement to the company's creditors (s99(1) IA 1986 and rule 6.14(7) IR 20016). The directors must send creditors their statement of affairs no later than the business day before the decision date.
Directors often rely upon professional advisers when making the decision to wind up and the steps to be followed once the decision has been made. Whilst LM Insolvency & Advisory Limited will assist you with the necessary steps, you will appreciate that and your fellow directors are ultimately responsible.
The meeting of members may be held before or after the decision date for the deemed consent procedure or virtual meeting at which creditors decide on the nomination of the liquidator.
The creditors will also be asked to appoint a liquidation committee, should they wish.
Creditors (including directors and employees) may also request a physical meeting under section 246ZE of the IA 1986 in accordance with rule 15.6, in place of a deemed consent procedure or virtual meeting, providing a written request for a physical meeting is made by;
Such a request can be made before or after the notice of the decision procedure or deemed consent procedure has been delivered.
The liquidation process is started by the directors who pass a board resolution for the Company to be wound up voluntarily and agree the date, time and venue of the meeting of shareholders and deemed consent procedure or virtual meeting for creditors.
Meeting of shareholders
The meeting considers a special resolution that the Company cannot, by reason of its current and/or impending liabilities, continue its business, and that it is advisable to wind up.
A company goes into CVL if its members pass this special resolution for its winding up, with a majority of at least 75% of those present and voting in person or by proxy (section 84, IA 1986 and section 283, Companies Act 2006). The members also nominate an insolvency practitioner to act as liquidator. This requires an ordinary resolution passed by a simple majority of more than 50% of those present and voting The liquidation is deemed to commence from the passing of the resolution (section 86, IA 1986). After its members resolve to wind it up, the company's creditors may nominate a person to be a liquidator.
Deemed consent or Virtual meeting of creditors
From 6 April 2017 there will no longer be a meeting of creditors following the removal of section 98 of the Insolvency Act 1986 (“IA 1986”). A liquidator will be appointed under the amended section 100 of the IA 1986 and rule 6.14 of the IR 2016.
The directors must deliver a notice to creditors seeking their decision on the nomination of the liquidator under section 100 of the IA 1986 and rule 6.14 of the IR 2016 by the deemed consent procedure or a virtual meeting. The notice must contain the information required in rule 6.14(8) of the IR 2016 and rules 15.7 (deemed consent) and 15.8 (notices to creditors of decision procedure) of the IR 2016. The decision date must be no earlier than three business days after the notice is delivered and no later than 14 days after the resolution is passed to wind up the company.
The directors of the company must prepare a statement of affairs within seven days after the day of the members' resolution and send the statement to the company's creditors (s99(1) IA 1986 and rule 6.14(7) IR 20016). The directors must send creditors their statement of affairs no later than the business day before the decision date.
Directors often rely upon professional advisers when making the decision to wind up and the steps to be followed once the decision has been made. Whilst LM Insolvency & Advisory Limited will assist you with the necessary steps, you will appreciate that and your fellow directors are ultimately responsible.
The meeting of members may be held before or after the decision date for the deemed consent procedure or virtual meeting at which creditors decide on the nomination of the liquidator.
The creditors will also be asked to appoint a liquidation committee, should they wish.
Creditors (including directors and employees) may also request a physical meeting under section 246ZE of the IA 1986 in accordance with rule 15.6, in place of a deemed consent procedure or virtual meeting, providing a written request for a physical meeting is made by;
- 10 creditors (in number); or
- 10% in value of any class of creditors or
- 10% in number of any class of creditors
Such a request can be made before or after the notice of the decision procedure or deemed consent procedure has been delivered.