A Creditors Voluntary Liquidation (CVL) procedure, which is the most common type of liquidation, is initiated when a company can no longer pay their debts as they fall due (i.e. it becomes insolvent).
A meeting of the creditors of the company should be called. This is done by sending notices to the creditors and by publishing details of the meeting in two daily newspapers which are circulated in the district of the company’s registered office (in practice, national newspapers are usually used).
It would be usual for a company to nominate a Liquidator for the purposes of the meeting. The creditors then have the option to either appoint that Liquidator or to vote to appoint another.
Creditors Voluntary Liquidation Procedure & Responsibilities
Once the Liquidator is appointed, (s)he will have the following duties:
- take possession of a company’s property, including its books and records;
- list the people who are owed money and how much they are owed;
- list the people who must contribute to the company’s assets on its winding up and how much they have to pay;
- investigate the company’s affairs;
- sell the company’s assets;
- pay the company’s debts in the order the law states;
- give any remaining money to the members in line with their entitlement
- report any suspected criminal offence by the company, a past or present officer (director, secretary and so on) or any member to the Office of the Director of Corporate Enforcement (ODCE) and the Director of Public Prosecutions (DPP).
When the creditors voluntary liquidation is complete, the Liquidator must:
- write a report on the winding-up;
- call a general meeting of members;
- call a creditors’ meeting (in the case of a creditors voluntary liquidation);
- deliver their report to the Companies Registration Office (CRO).
The Liquidator must, within six months of being appointed, give the ODCE a report about the company directors’ conduct in the twelve months before the company liquidation. In certain cases, the Liquidator may also recommend the restriction or disqualification of company director/s (for example, where directors have not acted honestly and responsibly).
However, most company failures are not the fault of the directors and restriction or disqualification would only happen in a small minority of cases.
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