Updated: 15th January 2020
Published: 2nd January 2018
The rules on how a company can be liquidated were overhauled via the Small Business, Enterprise and Employment Act, 2015, introducing updated processes and modern methods of communication from April 2017.
A faster and more straightforward procedure now allows directors to liquidate their company in seven days – a considerable improvement on the old system that had been in place for more than 30 years.
Initially, a meeting is held with a licensed insolvency practitioner (IP) to assess the company’s situation and advise whether voluntary liquidation is the best option. Here is a general timeline of events should you place your company into liquidation.
A meeting of the board is held, at which you and other directors sign a resolution to place the company into voluntary liquidation. ‘Short notice’ is given to shareholders of an extraordinary general meeting to approve the liquidation – 75% of shareholders (by value of shares) must agree the decision.
New insolvency rules mean the insolvency practitioner can email creditors to inform them of the situation, and invite them to vote on the proposal via a virtual meeting on day seven. Previously this was done via an in-person meeting which was rarely attended by creditors. If more than 10% (by value) of creditors wish to meet in-person, however, a physical meeting can still be arranged, and this would take place in a further seven days.
If a virtual meeting is held, creditors phone in or use video conferencing to place their vote. A new measure called ‘deemed consent’ can also be used by the IP. Deemed consent means that, unless 10% of creditors (by value or in number) or 10 creditors individually, object, then the liquidation is assumed to have been approved.
The insolvency practitioner sends out a Statement of Affairs and a SIP6 report to creditors. The new insolvency rules now allow this to be done via post, email, or by downloading from a website provided by the IP.
The Statement of Affairs is prepared by yourself and other directors, with the assistance of the IP, and shows why the company has failed. The SIP6 report provides details of the company, its creditors and shareholders, and a short business history.
Day seven sees the shareholders meet to approve the liquidation if they’ve signed a Consent to Short Notice of a General Meeting. If a virtual meeting of creditors has been arranged, this is held after the shareholders meeting. Otherwise, the deemed consent rules mentioned earlier come into force.
If you would like more information about insolvent liquidation, or need professional assistance because your company is failing, Real Business Rescue can help. We are a major part of Begbies Traynor Group, and offer a free same-day consultation with 78 UK offices nationwide.