Insolvency
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INSOLVENCY
Winding Up Companies
There are three methods of ending the life of a company. These are are a member's voluntary winding up a creditor's voluntary winding up and a compulsory court winding up.
MEMBERS' VOLUNTARY WINDING UP
The company must be solvent when the members of that company decide to end its existence.
Declaration of solvency
The declaration of solvency must be sworn by the directors of a company, or majority of them, at a meeting of the directors.
Please note, if the company is in fact insolvent,and the directors swear a declaration stating that it is solvent, they can become liable personally for the debts of the company under the Companies Act 1963
The resolution to wind up
WHEN the directors of a company have made their declaration of solvency, and a report has been given by the independent person, the directors must call an extraordinary general meeting ('EGM') of the company, to be held within 28 days of the date of the declaration of solvency.
CREDITORS VOLUNTARY WINDING UP
A creditor's voluntary winding up is when the members in general meeting resolve that the company cannot by reason of its debts, continue its business, and that it be wound up voluntarily. A declaration of solvency is not used in this case.The winding up is brought by the members themselves.
The Extraordinary General meeting is held at which the members consider and if they think fit, pass an ordinary resolution that the company be wound up.
At that meeting the members appoint their choice of liquidator.
The member's meeting can also propose one or more representatives for the Committee of Inspection. Representatives are not usually selected but they can be if the members so wish.
The primary duties of a liquidator are normally the realisation of assets, agreement of creditors' claims and the distribution of available assets to the creditors in accordance with their statutory priorities. The Company Law Enforcement Act 2001 reinforces the duty of a liquidator to investigate the conduct of the directors during the period prior to liquidation..
COMPULSORY COURT WINDING UP
A creditor who is owed money by the company can petition the Court to have the company compulsorily wound up.
A Statutory Demand is served which gives the company 21 days to make payment. If payment is not received or the demand challenged the next stage is to issue a Winding Up Petition seeking the Winding Up the company. The Petition is given a date by the Court and it is advertised in national newspapers and at the hearing date if payment is not made a Liquidator will be appointed and the company will be put into Liquidation.
Thereafter Liquidator will deal with the gathering in and disposal of the assets of the company and its general affairs.
This is a short summary of insolvency and liquidation law.
It may be that you want to discuss the position of your company, especially in the current global downturn.If so please do not hesitate to contact us.
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