The world of business can be a tough, unforgiving place. Each and every day businesses decide to close their doors and stop trading. Though the reasons for doing so are myriad, they all reach the same point eventually; insolvency, and ultimately liquidation. The term might strike fear into the heart of any businessperson, but in reality the process is much less frightening than you might think. The trouble if you’re trying to get your hand around liquidation, though, are the various different forms of liquidation your business can be put through. To help with that confusion, we’ve put together this short guide to creditors’ voluntary liquidation.
Put at its most simple, a creditors’ voluntary liquidation is when a director decides to liquidate (or ‘wind up’) their company. The reasons for doing this may be manyfold, but a creditors’ voluntary liquidation has a few specific requirements that must be met in order to adhere to the law. They are as follows:
– The director must gain shareholders agreement over the liquidation. Doing this requires calling a meeting of the shareholders. The vote held at the meeting should have at least 75% of the shares voting in favour of a winding up resolution. If you gain that resolution there are three further steps to follow. Firstly, you must seek out and appoint an authorised insolvency practitioner to act a liquidator and take charge of the liquidation procedure. Failing to do this is against the law. Secondly you must send the resolution to Companies House within 15 days or making it. Thirdly, you must advertise the resolution in The Gazette.
– You must also hold a creditors’ meeting within 14 days of the winding up resolution with yourself, another director, the companies’ secretary and your appointed insolvency practitioner. You are required to tell the creditors about the meeting at least 7 days before it happens and advertise it in The Gazette. You are required to present the statement of affairs at the meeting, which gives details of the company’s situation and assets. Use form 4.19 in England, Wales or N.I and form 4.4 in Scotland. Both are available from the government’s websites.
Following those rules will effectively wind up your company, but the role of the director once the liquidator is appointed changes. A director no longer has control of the company nor anything that the company owns and cannot act for or on behalf of the company in any respect.