PHILIP A BECK
Licensed Insolvency Practitioner
41 Kingston Street, Cambridge CB1 2NU
Tel: 0800 1953605 (Free call) or 01223 367022
Fax: 0844 5048737
Once the directors have taken the decision to place the company into members' voluntary liquidation (MVL), advice should be taken from a Licensed Insolvency Practitioner (IP). Although a solvent liquidation does not involve insolvency, because the procedure is similar to dealing with an insolvent liquidation, the law states that only an IP can act as Liquidator. The IP will in any case advise the company's directors in the period leading up to the actual date of liquidation, ensuring that the correct procedure is followed and necessary documents drawn up correctly. The procedure is basically as follows:
1. Hold a board meeting to confirm the decision. The IP will assist in the preparation of minutes showing that the directors resolved 1. to prepare a declaration of solvency, 2. to convene an extraordinary general meeting (EGM) of the shareholders to propose a resolution to wind up the company, and 3. to instruct the IP to assist the directors in this process.
2. Draw up a Declaration of Solvency, with the IP's assistance. The declaration must be sworn by a majority of the directors, and swear that the directors, having made a full enquiry into the company's affairs, are of the opinion that the company would be able to pay its debts in full within 12 months of the proposed date of the liquidation. As this is a document sworn before a solicitor and filed at Companies House, there are potentially serious penalties for directors who swear the document negligently or recklessly.
3. Call an EGM of the shareholders, again, with the IP's assistance. The meeting should be called on 14 days notice to pass a special resolution to wind up the company but not more than 5 weeks after the date of swearing the declaration of solvency. The EGM need not be called if the shareholders, by unanimous consent, agree to a written resolution, the date of the liquidation will then be the date the last shareholder signs the written resolution.
4. Prepare accounts and corporation tax returns to the date of liquidation. Submit these for agreement with HM Revenue & Customs and pay any tax due thereon. Liquidation will cause a new accounting period to start from that date. Advice should be taken from the company's tax advisers as to any implications of change of accounting date before going ahead with the liquidation.
5. Once the liquidator has been appointed he will deal with the statutory filing of documents and publication of required notices. He will then deal with the realisation of the company's assets, agree and pay any liabilities that he was aware of or have subsequently come to his notice, then, once he is in a position to do so, pay the costs of the liquidation, and distribute the remaining funds to the shareholders in accordance with their shareholdings and rights under the company's articles of association. The timing of distributions to shareholders can be agreed by the liquidator and shareholders to take advantage of tax allowances.
6. At the end of the liquidation the liquidator will call a final meeting of the shareholders to receive his report and to approve his account of the liquidation and fee thereof. The company will be automatically dissolved by the Registrar of Companies 3 months after the final meeting has been held.
Philip Beck is a Chartered Accountant and Licensed Insolvency Practitioner operating since 1996 with substantial experience in undertaking liquidation, both solvent and insolvent.
Please note that this site deals only with company and tax law in the United Kingdom of Great Britain and Northern Ireland. It is not applicable to other jurisdictions.
Were you looking for IVA advice instead ?