Liquidation: Get the details right

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Jennifer Adams
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In the second of a series of checklists for closing down companies, Jennifer Adams moves on to the more complicated processes involved in liquidation, both voluntary and under duress from creditors.

The previous article in this series on bringing companies to an end covered the ideal world - no debts, agreement between directors/shareholders and for the sake of the completion of a few paper formalities Companies House does the administration for you by striking off the company.

Nice and easy. Comments on Any Answers tell a different story when dealing with the ending of a company (for example What to do if company trying to strike own company off - but owe us money and have CCJ)

Insolvency legislation is complex and the winding up of a company should be undertaken only under advice from a Licenced Insolvency Practitioner. The actual procedure is similar whoever applies for the liquidation. The processes covered in the full article include:

  • Members voluntary liquidation - Usually undertaken where the purpose of the company has been achieved or the owner wishes to retire rather than sell the company. The company is solvent such that all creditors’ claims can be settled in full.
  • Creditors’ Voluntary Liquidation (CVL) - members hold meeting to pass the Special winding up resolution; same submissions and forms to Companies House, but creditors meeting must be held within 14 days of the resolution being passed with at least seven days’ notice must be given to all creditors. 
  • Compulsory Liquidation (IA 1986 s123) - Where the court makes a winding-up order on the petition of someone such as a creditor on the grounds that the company cannot pay its debts. The amount of debt owed must exceed £750 and the creditor must prove that he has not been paid three weeks after the sending of a statutory demand form 4.1.

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09th Dec 2011 11:25

For accountants

From an accounting point of view the issue of overdrawn directors accounts looms large in liquidation.  The reason, of course, is that it is the duty of the liquidator to chase any outstanding debts on behalf of the creditors.  If the director has been withdrawing money in the form of dividends when there are no distributable reserves then he/she is in effect a debtor and the liquidator can pursue them for the money.  Please see this page on overdrawn directors accounts in liquidation



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09th Dec 2011 11:56

Liquidation: get the details right


You need to make it clear in your notes section that:


Dissolution in Voluntary Liquidation cases ie MVL and CVL occurs 3 months following filing of forms 4.71 and 4.72 (s201 IA86).WUO are concluded 3 months from the filing of a final notice (OR case) or Form 4.43 (IP case). (s205 IA86).Following dissolution a WU case can be restored to go back into WU if for example more assets come to light or if a litigation case is started aginst the company.

I'm unsure what your example stating the company cannot be restored for two years after WU refers to?


Mark Buckley


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09th Dec 2011 16:27

How do Creditors know when a company is in liquidation?

I am not very clued up on Liquidation.  Who is responsible for informing creditors when a company is in liquidation?  For example, a Carrier Company went into Creditors Voluntary Liquidation leaving all  of its customers holding worthless payment books of stamps to put on the parcels - paid in advance, of course.  Many customers?  100s, some with £100 worth of stamps up to one with £1,500. We got caught for £300+ and I have a few clients and suppliers who got caught for a similar amount as well. We filled in a form the Liquidator supplied but have no chance of getting anything and we found him in the London Gazertte when it appeared the Creditors Meeting had already been held and  everything had been tied up already.  The Liquidator took the view that it is up to the Creditors to check the Gazette but why should you if you dont know the company is in liquidation? The same Limited company is still a partner in a Limited Liability Partnership formed a few months before the company went down.  The company were ringing round a couple of days before the date they ceased trading trying to sell more books of stamps. The Director has directorships with about 13 companies (3 struck off or liquidated) including one of the very  largest animal charities of which he is also a trustee.  I think it all smells bad. I understood you had to be squeaky clean to be a Trustee of a Charity.


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10th Dec 2011 17:05

How do creditors know when a company is in liquidation?

In a Creditors Voluntary Liquidation it is the directors responsibilty to prepare and sign a Statement of Affairs. This includes a list of creditors names and addresses and it is to these people that notice of the creditors meeting is sent. The details of the meeting are advertised in the London Gazette, which we are all deemed read, as a catch all. The notice also used to be advertised in two local papers in the business vicinity but since business is increasingly carried on over ever wider geographical areas this requirement has been scrapped.

A responsible Insolvency Practitioner would also have a look at the latest accounts and the company records to try to ensure the completeness of the list, but is largely reliant on the directors and the accuracy of the records. Major errors in either of these areas would certainly be included in the report on the directors' conduct sent to the  Directors' Disqualification Unit.

Hope that helps


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12th Mar 2012 16:00

How do creditors know when a company is in liquidation?

Wow, this article has been amazingly helpful.

I've recently started working for a insolvency practitioner (Straight out of uni), and I've been looking for a UK based resource like this.


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