The Creditors Decision Procedure- In a Creditors Voluntary Liquidation (CVL)
How a limited company is placed into liquidation & how a Liquidator is appointed
CREDITORS DECISION PROCEDURE
There are several different Decision Procedures that could be followed depending on the circumstances.
The most common is Deemed Consent, which is where the directors’ choice of Liquidator is appointed automatically, unless creditors object.
The second most common is a virtual meeting which could be held by way of a conference call or even over Skype, Facetime or something similar.
Directors and Insolvency Practitioners are not allowed to hold a physical creditors meeting anymore unless formally requested to do so by the creditors. This was introduced by The Insolvency (England and Wales) Rules 2016.
NOTICE OF A CREDITORS DECISION PROCEDURE
For a company to be placed into creditors voluntary liquidation a decision procedure of creditors must be convened.
The company must send notice of the decision procedure to all creditors, giving 3 business days. The company must also advertise this notice in the London Gazette.
The decision procedure must also be held within fourteen days of the shareholders meeting at which time the resolution to wind up the company was passed.
The notice must include the following information:-
1. Date, time and venue of the procedure.
2. Place where and deadline within which proxies must be deposited if a creditor wishes to vote through a proxy at the decision procedure.
3. Creditors rights to information, and their right to requisition a physical meeting of creditors if required.
4. The dial in, or conference details, if a virtual meeting is being called.
CONDUCT AT THE CREDITORS MEETING
This section only applies if a virtual or physical meeting is being held.
At that meeting the director will be the Chairman, however the Insolvency Practitioner will run the meeting and do most of the talking.
The Insolvency Practitioner will already have been appointed as the Liquidator of the Company at the shareholders meeting which would normally have been held a few moments before.
Usually only creditors and their representatives are able to attend at the meeting.
INFORMATION PROVIDED TO CREDITORS AHEAD OF THE DECISION PROCEDURE
It is customary now to provide the “pack” of information to creditors through an online portal which creditors can access ahead of the decision procedure. This pack will include:
1. A summary of the directors statement of affairs, which has been verified by a statement of truth.
2. Details are given to attendees of any prior involvement with the company or its directors of the proposed liquidator.
3. Confirmation is given of the venue and date of the shareholders meeting and the date notice of the shareholders meeting was dispatched.
4. Information is provided as to what resolutions were passed at the shareholders meeting.
5.The dates on which directors signed notices to convene the decision procedure and the date those notices were sent out to all creditors are noted.
6. Confirmation of any costs paid by the company in connection with organising the decision procedure and the preparation of the Statement of Affairs.
7. A brief report is given of the company's relevant trading history, including the director's reasons for failure.
8. Extracts from any audited, or if none, draft accounts produced for the periods covering the previous 3 years together with a deficiency account.
APPOINTMENT OF LIQUIDATOR
Nominations for the appointment of liquidator are received through proxy vote or alternatively from those attending the meeting.
A liquidator is appointed by having a vote of 50% or more of the value of votes cast in favour of the appointment of a particular person.
In certain circumstances a joint appointment of liquidators may be sought where appropriate.
If Deemed Consent is being used then the directors choice of Liquidator will be appointed automatically unless sufficient objections are received and a physical meeting is requisitioned.
In order to object and requisition a physical meeting 10 creditors, or 10% of creditors in number or value, must formally request a physical meeting in writing.
If you require FREE INITIAL ADVICE regarding a limited company decision procedure and the appointment of a liquidator or any other insolvency matter then please contact Chris Parkman on 01326 340 579 or email him at email@example.com.