Liquidations take the forms of:
- Members Voluntary Liquidation – where company is solvent,
- Creditors Voluntary Liquidation – where company is insolvent and creditors meeting approves the appointment or finally a Court Appointed Liquidator.
When is a Members Voluntary Liquidation appropriate?
Where the Company is no longer required to trade and there is value to be extracted for the benefit of Shareholders. When utilised in conjunction with good tax advice it can be very effective and efficient.
What is a Creditors’ Voluntary Liquidation?
A Creditors’ Voluntary Liquidation is where a company takes the decision to call a creditors’ meeting as the company is insolvent.
When is a Company Insolvent?
A company is insolvent when it cannot pay its debts as they fall due. Carefully note this is not defined as liabilities exceeding assets or vice versa. It requires careful consideration, access to facts and exercise of good judgement to correctly determine the solvency of a company.
Can a Company appoint a Liquidator itself?
A company can nominate a Liquidator to be appointed but this appointment must be confirmed by the creditors.
Can the Creditors of the Company appoint a Liquidator?
Yes, the creditors can appoint a Liquidator if there is a higher value of monetary claims in support of the creditors’ nominee as Liquidator.
Who ultimately appoints the Liquidator in a Creditors’ Voluntary Liquidation?
In a Creditors’ Voluntary Liquidation, the Liquidator is ultimately appointed to the company by the Creditors of the insolvent company.
What is the process to appoint a Liquidator in a Creditors’ Voluntary Liquidation and who can initiate this process?
The process commences with the Directors passing a resolution to make a recommendation to the Members of the Company that a Liquidator be appointed because the company is insolvent and cannot pay its debts as they fall due.
The Company then calls both a Members’ and Creditors’ Meeting giving 10 days’ clear notice.
At the Members’ meeting, a liquidator may be nominated but this must be confirmed at the Creditors’ Meeting. At the Creditors’ Meeting, the Members nominee will either by confirmed by the Creditors or an alternative Liquidator may be appointed.
Who is responsible for the winding up of the Company and realising the assets when a Liquidator has been appointed?
After a Liquidator has been appointed over the Company, the Liquidator is then responsible for realising the assets of the Company on behalf of the creditors and shareholders.
The executive powers of the directors over the Company effectively cease upon the appointment of a liquidator. It is, unlike a Receivership, the end of the process for the directors, subject to providing and information required by the liquidator and responding to any restriction application should such arise.
Who does the Liquidator report to on their investigation into the Collapse of the Company and the actions of the Directors?
The Liquidator reports to the Director of Corporate Enforcement “ODCE” in accordance with the Company Law Enforcement Act, 2001 on both the reasons for the collapse of the Company and the actions of the Directors. The Liquidator will take direction from the ODCE regarding an application for restriction or disqualification orders against the directors
What is a Court Liquidation?
A creditor whether that be a trade creditor, a Bank or the Revenue Commissioners along with an aggrieved shareholder has the right to petition the High Court with an application to appoint a Liquidator. The petitioner has the right to recover their cost if successful in their application and the company has the right to defend the petition.
Are Court Liquidations more cost effective?
No, it is a High Court Process involving solicitors and barristers, each step in the liquidation from opening a bank account to disposing of assets is subject to court procedures. The Court is mindful of the additional cost burden imposed and will where possible encourage the effective implementation of a Creditors Voluntary Liquidation