Creditors Voluntary Liquidation Procedure (CVL)

An Outline of the CVL Procedure

The CVL must follow the procedure set out in the Insolvency Act 1986 (as amended). We will assist the Board with the preparation and administration at each stage, including drafting notices, minutes and other documents where appropriate, but the ultimate responsibility remains with the Board. The following main steps must take place in each appointment:

Board meeting: A quorate meeting of the Board of Directors will have to approve the issue of notices convening the members' meeting required by statute to place the Company into CVL, nominate someone to convene the decision procedure for creditors to appoint a Liquidator and state which Directors are to verify a statement of affairs on behalf of the Company by completing a statement of truth. We will provide standard minutes that include resolutions that, among other matters, will approve our pre-appointment fees and appoint us to assist with the convening of the decision procedure to appoint a liquidator.

Notices: Notices have to be issued to members and creditors within statutory timescales convening a meeting of members to wind up the Company voluntarily and appoint a Liquidator, and to convene a decision procedure where creditors appoint a Liquidator and authorise the payment of any outstanding pre-Liquidation fees incurred in connection with preparing the Statement of Affairs and convening the decision procedure from the assets of the Company. Notices will need to be sent to all creditors on the same business day.

Statement of Affairs: The Directors nominated by the meeting will be required to prepare a statement of affairs on behalf of the Company. We will assist you in preparing a draft statement of affairs from information that the Board provides, but it remains the Board's statement, and those who verify the accuracy of its contents by completing a statement of truth will be ultimately responsible for any false disclosure or omission. The Statement of Affairs must be provided without delay as it must be sent to the creditors so that they receive it no later than the business day before the day that they make a decision as to who will be appointed Liquidator. It is the responsibility of the Directors, as those initiating the Liquidation process and convening a Decision Procedure of the creditors to appoint a Liquidator, to ensure that this statutory timescale is adhered to, as failure to do so is an offence under the insolvency legislation that could lead to a fine being imposed. The Director nominated to convene the decision procedure to appoint a Liquidator, will also be required to provide additional explanatory information in support of the statement of affairs, which will be sent to the creditors so that they receive it no later than the business day before the day that they make a decision as to who will be appointed Liquidator. Although we will assist in preparing the explanatory information, it remains your responsibility as Directors to ensure that it is accurate. In addition, where a meeting of creditors is held the nominated Chair may have to answer questions raised by creditors in response to any disclosure made in it.

Company meeting: A general meeting of the Company will be convened at which members will be required to pass a resolution placing the Company into voluntary Liquidation and appointing a Liquidator. You have indicated that the members will appoint Kieran Bourne of this Practice, as Liquidator.

Decision by the creditors: After the Company meeting, the creditors have the opportunity to nominate a Liquidator in place of the Liquidator appointed by the members, appoint a Liquidation Committee to assist the Liquidator, and in the absence of a Committee, approve any pre-Liquidation fees not already paid, where they are to be paid from asset realisations in the Liquidation. There are two ways the creditors can nominate a Liquidator. First, by a Deemed Consent procedure, where the Liquidator appointed by the members will be automatically nominated by the creditors, unless sufficient creditors object; and secondly by way of a decision procedure, usually a virtual meeting, that is one where the participants are not present in the same location, but where they can communicate directly with one another and the Chairman of the meeting. We will advise the Board on the most appropriate way for the creditors to nominate a Liquidator. If a virtual meeting is held, one of the Directors will need to act as Chair of that meeting. Whichever approach is taken, it is also possible for the creditors to requisition a physical meeting of creditors if the statutory minimum number of creditors in value, number, or as a percentage of total creditors, make a request in writing before the decision is made by the creditors as to who is to be Liquidator. One of the Directors will need to act as Chair of that meeting. Where there is doubt over a prospective participant's authenticity or entitlement to participate at a decision procedure or physical meeting, and/or the amount for which a participant should vote, then it may be appropriate for the Chair/Convener of the meeting to consider obtaining independent assistance to determine the appropriate action to take. Similarly, where a Deemed Consent procedure is used, then it may be appropriate for the Director(s)/Chair/Convener(s) of the procedure to consider obtaining independent advice to determine whether it is appropriate to allow, or refuse to allow, any objections. If that situation arises then we will not be able to assist as we will not be independent given that one of our Insolvency Practitioners is seeking the appointment as Liquidator, but we will direct you to an appropriate firm of solicitors who will be able to provide such advice.

Post-appointment notices: After the appointment of the Liquidator, the Liquidators are required to issue and advertise a variety of notices for the attention of the Registrar of Companies, the Secretary of State, other statutory bodies such as HM Revenue and Customs and the members and creditors generally.

Fee approval: After their appointment, the Liquidator will need to seek approval for the basis of his/her fees for acting as Liquidator. The basis of their fees will be approved by the Committee if one is appointed. If no Committee is appointed, then the Liquidator will seek approval from the creditors by seeking a decision from the creditors. Where a Virtual Meeting is held for the creditors to nominate Liquidators, the Liquidators may seek approval for the basis of their fees at that meeting, if no Committee is appointed.

Company Directors' Disqualification Act: Within the first three months following his appointment, the Liquidator is required to complete a confidential online report to the Secretary of State on the conduct of those who have been directors, or shadow directors, of the Company in the last 3 years. The information contained in the online report could result in the Secretary of State taking action to disqualify one or more of the directors, or shadow directors, from managing a Company for a period of between 2 and 15 years.