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There are two types of insolvent liquidations; Creditors Voluntary Liquidation and Compulsory Liquidation.

Whilst we can assist with the procedure for placing a company into Compulsory Liquidation it is more commonly a Creditors Voluntary Liquidation (CVL) that we assist our clients with and this is described in more detail below.

Creditors Voluntary Liquidation

Who Can Benefit From It?

A CVL may be appropriate in the following circumstances:

  • The company is insolvent
  • The market for the company’s services or products has declined
  • The company no longer appears to be viable
  • The directors do not believe that they can rescue the company
  • It is used as part of the restructuring of a group

An Overview Of The Procedure

There are three meetings to be held to place the company into Creditors Voluntary Liquidation, a Board meeting, a General meeting and a Creditors meeting.

Board Meeting

The directors of an insolvent company elect to call a meeting of the directors which is otherwise known as the Board meeting. This meeting can be held at our offices or wherever the usual company meetings are held. At the board meeting the directors will pass a resolution to agree to wind the company up voluntarily.

The directors will pass eight other resolutions at the board meeting:

  • To prepare a Statement of Affairs for the company
  • To call a General meeting of the company shareholders
  • Nominate a director to act as chairman of the general meeting of shareholders
  • To call a creditors meeting to wind up the company
  • Nominate a director to act as chairman of the creditors meeting
  • Send notice of the meetings to any Qualifying Floating Charge holder (QFCH)
  • Nominate an Insolvency Practitioner to be liquidator
  • To agree the remuneration of the proposed liquidator

The directors must provide the shareholders with at least 14 days notice of the General meeting, however this can be waived if 90% of shareholders agree to short notice. In practice the meeting of members is held on the same day as the creditors meeting, however if this is not the case then the creditors meeting must be held within 14 days of the members meeting.

Notice of the meeting of creditors must also be provided to all creditors of the company, giving them at least 7 days minimum notice.

General Meeting

At the General meeting the shareholders will pass three resolutions in respect of the company:

  1. A special resolution to wind up the company voluntarily. This resolution requires 75% of shareholders to agree in order for it to be passed. This is extremely important if there are a number of shareholders and there may be a dispute. We can assist in talks with shareholders to advise the respective benefits and negatives of voluntary liquidation, so that agreement can be obtained by the required number of shareholders.
  2. An ordinary resolution to appoint a liquidator. This is usually the Insolvency Practitioner assisting with the calling of the meetings and the preparation of the documents for the meetings. This resolution requires a simple majority to pass.
  3. An ordinary resolution to agree the remuneration of the liquidator. Again this resolution requires a simple majority to pass. DCA Business Recovery has an  extremely transparent fee structure and details of the fees would have already been discussed by this stage.

Creditors Meeting

The creditors meeting is usually held on the same day as the General meeting, and creditors are invited to the meeting to receive a copy of the Statement of Affairs and ask the directors any questions they may have. Whilst a director will act as Chair of the meeting, the proposed liquidator will oversee the proceedings and ensure that the relevant paperwork is signed.

The creditors would have received a Proof of Debt and a Proxy form when they were sent notice of the meeting, and if they do not wish to vote in person they can vote by proxy using the proxy form.

A creditors vote is needed to confirm the winding up of the company and appoint a liquidator, however our staff will work to speak with creditors in order that they fully understand the procedure and what their vote means.

Once the meeting has finished the company is in liquidation and the directors power cease. The liquidator will then advertise the company as being in liquidation and their appointment as liquidator. Notice will then be sent to creditors to this effect along with a copy of the report and statement of affairs signed by the directors. Finally the liquidator notifies Companies House of the liquidation and their appointment.

Assets

The Liquidator has a duty to ensure maximum value for assets is achieved and to generally deal with the affairs of the winding up of the company, including the company name and goodwill.

In many cases, the directors wish to purchase the assets of the business from the liquidator. This is possible and our agent would be instructed to provide a valuation.

This is merely an outline of the procedure and all of this will be further information can be provided to you at the initial meeting or if you wish to discuss your situation by telephone please do not hesitate to call us on our Freephone number and speak to an advisor.