Liquidate My Company

How do you liquidate your company?

Due to Insolvency Rule changes in 2017, there no longer needs to be a physical creditors’ meeting at the start of the liquidation process. However, physical shareholders meetings are often still held and physical creditors meetings are still possible if requested by a certain number/amount of creditors.

With this in mind, here are the typical stages of the liquidation process:

1. Advice

If the Directors of the Company suspect that the Company is insolvent, or if they believe it could benefit from specialist advice from a licensed insolvency practitioner, the director’s should act swiftly to make contact with Bridge Newland Limited whom can provide initial advice for no cost.  This advice can be over the phone, by videocall or at a physical enquiry meeting.  The Company’s accountant or any advisors to the Company can also be present in these discussions if preferred given their knowledge of the financial position of the Company.

Our experienced insolvency staff will review all options available and will provide detailed advice on the best solution for your Company.

2. Engagement & Director’s Board Meeting

If the advice obtained is that the Company should be placed into Liquidation, assuming that they wish to engage Bridge Newland to administer their liquidation, the Directors and any shareholders with 25% or more of the total shares must firstly provide the nominated liquidator with certified proof of their ID and proof of address and confirm that they are unaware of any conflicts of interest between them and the firm (or its employees) and a full engagement letter is then drafted and signed which formally engages Bridge Newland.

Bridge Newland then draft all formal documents for signing which includes a board minute between the directors that resolves the various actions required to commence the liquidation with the most important resolutions being to agree to wind up the Company and to propose a liquidation to act.  A majority of the directors must agree to these resolutions for them to be valid.

3. Shareholders Decisions

Once the Directors have engaged Bridge Newland and resolved to nominate a liquidator the Shareholders must then agree these proposals by calling a decision procedure to sign off the same resolutions.  This is usually done by post using a process called “a written resolution process” meaning that the paperwork is drafted and sent to all shareholders with a formal notice of the resolutions being sought and a voting form.  This voting form must then be sent to the nominated liquidator by no later than the decision day, which is a date set for all these resolutions to be considered.  A physical meeting can also be held to do these actions but this is now rare.

Where votes are taken by post via the written resolutions process (and not at a physical meeting) the shareholders typically nominate one of them to be responsible for dating all the votes as they are generally best to remain undated until the creditors pass their resolutions in order to avoid the liquidator being appointed by the shareholders but not by the creditors should some creditors object to the nominated liquidator’s appointment.

The key thing to remember here is that in order to pass the resolution to wind up the Company (to place it into Liquidation), consent to the resolution to wind up must be received from shareholders that equal 75% or more of the total issued (voting) shares.

4. Creditors Decisions

With the voluntary Liquidation process, creditors must also agree that the Company should be wound up and who should be appointed as the Liquidator in order for the resolutions to be passed. However, a physical vote from a creditor is no longer required as creditors can be considered to have approved the resolutions if sufficient creditors don’t object to the proposals or if sufficient creditors haven’t requested a physical meeting to be held to consider the resolutions. This automatic process is called the deemed consent process.

Like the shareholders, creditors are given notice of a decision date and the resolutions being proposed and but this time it is considered that the resolutions have been passed automatically when the decision date has passed if the requisite number or value of creditors haven’t objected or requested a physical meeting in the required timeframe.

If it is considered necessary, a virtual meeting process can be used to pass the creditor resolutions. This is usually done where there is a risk that all creditors are not known so the intention to hold a meeting to consider the resolutions is advertised to catch any missing creditors, or where creditors are likely to have questions which they need answers to in order to decide how they wish to vote on the proposals. However, this is rarely required due to the detailed information provided to creditors by this office at the outset and our availability to answer questions if required.

5. Appointment

Once the creditor and shareholder decisions have been passed. The Company is considered to be in Liquidation and the nominated liquidator then becomes the Liquidator, duly appointed.  The liquidator will then inform all members and creditors of their appointment and if not already done, will look to realise all of the assets in a bid to then make dividends to creditors as much as can be afforded from the funds realised form these sales and or collections made from debtors and refunds etc.

If the realisations made are insufficient to pay all creditors in full, together with the fees and expenses of the liquidation, the shortfall to creditors is written off unless the creditors have a personal guarantee whereby they will seek to recover their shortfalls from the guarantor/s.