What happens after a liquidator has been in place in a Members Voluntary Liquidation for one year?
Conversion Of A Members Voluntary Liquidation (MVL) To A Creditors Voluntary Liquidation (CVL)
If after one year, following the date of his appointment, the liquidator is of the opinion that the company will be unable to pay its debts in full (together with interest at the official rate) as stated in the Directors' Statement of Truth and Declaration of Solvency then Section 95 of The Insolvency Act 1986 must then be followed.
The liquidator must:
1. Summon a decision procedure of creditors for a day not later than the 28th day after the day on which he formed that opinion.
2. Send notices of the deemed consent procedure of creditors to the creditors by post not less than 7 days before the day on which that meeting is to be held.
3. Advertise that decision procedure once in the London Gazette.
4. Provide creditors, free of charge, with such information concerning the affairs of the company as they require during the period up to and including the day of the decision procedure.
5. Produce a statement in the prescribed form as to the affairs of the company.
6. Provide that statement before the decision procedure of creditors, and
7. Attend and preside at that decision procedure.
The members voluntary liquidation then converts to a creditors voluntary liquidation. As from the day of the creditors meeting held as above, the Insolvency Act has effect as if:-
1. the directors' declaration of insolvency had not been made
2. the decision procedure of creditors and the company meeting at which it was resolved that the company be wound up voluntary were the meetings mentioned in Section 98 of The Insolvency Act 1986.
To summarise the above in plain English when a solvent liquidation is first commenced the directors believe that all creditors will be paid in full - But after one year into the liquidation a double check is made to assess whether or not that initial belief still holds true. If it is then the Members Voluntary Liquidation continues. If it is not them the Members Voluntary Liqudation coverts to a Creditors Voluntary Liquidation.
Purnells have developed a Guide to Members Voluntary Liquidation,which we hope will be useful.