5.3 Members Voluntary Liquidation

Question 1

Which SIPs don’t apply in an MVL?

Answer 1

SIP 2 - Investigations/ submission of conduct reports

SIP 13 - Disposals of assets to connected parties

Question 2

What are the important points for an MVL?

Answer 2

 Company must be able to pay all of its creditors in full, with interest, within 12 month from the resolution to wind up
 Technically, this is not necessarily“solvency”
 Placed into liquidation by resolution of members
 Liquidator has duty to settle any outstanding creditors
 In most (but not all) cases liquidator will distribute surplus to shareholders
 Distributions may be in cash (dividends) or in assets (“in specie”)
 Tax issues should be reviewed before liquidation

Question 3

What is the purpose of a board meeting?

Answer 3

 Minute reasons for liquidation
 Instruct notice to members of general meeting or of written resolutions
 Approve a declaration of solvency
 Appoint director to chair members’ meeting

Question 4

How much notice must be given of proposed resolution to any QFCH?

Answer 4

5 business days

Written notice of proposed resolution to wind up must be given to any qualifying floating charge holder (QFCH)

QFCH can appoint own choice of administrator.

Winding up resolution can be passed only:

 if person who received notice has consented in writing; or

Prior notice of resolution to QFCH and 5 business days have passed since notice given

Question 5

What is the Declaration of Solvency?

Answer 5

S89 IA86 Declaration of Solvency (DoS)

 The directors (or a majority of them) may at a directors meeting make a statutory declaration to the effect that they have made a full inquiry into the company’s affairs and that, having done so, they have formed the opinion that the company will be able to pay its debts in full, together with interest at the official rate….

Question 6

What info must be included in a Declaration of Solvency (DoS)?

Answer 6

R5.1(1)

 the name and a postal address for each director making the declaration
 That all or a majority of them, having made full enquiry, have formed the opinion that the company will be able to pay its debts in full, with interest, within a period not exceeding 12 months

 that the declaration is accompanied by a statement of the company’s assets and liabilities as at a date which is stated (being the latest practicable date before the making of the declaration).

Question 7

What must the statement of affairs that accompanies the DoS include?

Answer 7

b) a statement that the statement shows the assets of the company at estimated realisable values and liabilities of the company expected to rank as at the [latest practicable date]

….

f) the estimated costs of the winding up and other expenses;

g) the estimated amount of interest accruing until payment of debts in full;

h) the estimated value of any surplus after paying debts in full together with interest at the official rate.

Question 8

What is the directors’ responsibility for the Declaration of Solvency?

Answer 8

 Must have reasonable grounds for opinion that all creditors will be paid in full within period they specify

 If statement made without reasonable grounds, the director liable to imprisonment, or a fine, or both
 Presumed directors did not have reasonable grounds for opinion if debts not paid in full in period specified

Question 9

To what date must the Declaration of Solvency be made

How is it authenticated?

Answer 9

Date verified must be not more than 5 weeks before date of liquidation
(= members’ resolution to wind up)

 Declared in person in front of a solicitor, a notary of the public, or other authorised person, such as a commissioner for oaths

Question 10

When must the declaration of Solvency be delivered to CH?

Answer 10

before the expiration of 15 days immediately following the date on which the resolution for winding up is passed
(= members’ resolution to wind up)

Question 11

What rules apply when calling the members meeting?

Answer 11

Company’s articles take priority over CA 06 where differ

Question 12

How much notice must be given to members of general meeting (to resolve to wind up the company)?

Answer 12

Minimum 14 days notice

Members can agree to short notice of less than 14 days
 Short notice requires resolution by majority in number plus:
 90% in value for a private company; or
 95% in value for a PLC
of members entitled to attend and vote

Must advise members of their right to appoint a proxy.

Question 13

Other than members ， who else must be sent notice of the meeting?

Answer 13

directors
company’s auditors

Question 14

What is the quorum for the members’ general meeting (a CA 06 meeting)?

Answer 14

2 members to be present (in person or by proxy)
unless single member company.

Must be chaired by a director

Check articles for ability to hold remote meetings.

Question 15

What resolutions are required, and what majority is required?

Answer 15

Voting on basis of number of shares, or as set out in company’s Articles

SPECIAL resolution to WIND UP
 requires 75% members at meeting to vote for it

ORDINARY resolution to APPOINT LIQUIDATOR
 requires 50% members at meeting to vote for it

Question 16

When does a MVL commence?

Answer 16

At the time of passing of the resolution for voluntary winding up. (Meeting)

Where written resolution: when the required majority (75%) have signified their agreement to it = date of liquidation

Question 17

When can a company enter MVL by written resolution?

Answer 17

Private company only (not plc)

 Notice required to auditors and any QFCH

S296CA06:Passed when the required majority (75%) have signified their agreement to it = date of liquidation

 Additional resolution authorising a director to sign the Certificate of Appointment

Question 18

What are the contents of the Certificate of appointment?

Answer 18

(IP Must provide written consent before appointment.)

Signed by chairman of meeting OR person authorised by written

Evidence of appointment of liquidator

Question 19

What is the effect of an MVL?

Answer 19

 Cease to carry on its business, except so far as is required for its beneficial winding up

 Corporate state and corporate powers of company continue until dissolution

Question 20

What must be gazetted, and in what time frame?

Answer 20

Members’ resolutions
Notice of Appointment

Within 14 days

 No power to advertise otherwise at liquidator’s discretion

Question 21

What must be filed at CH, and in what time frame?

Answer 21

Members’ resolutions
Notice of Appointment

Within 14 days

Question 22

How long does the liquidator have to deliver notice of his appointment to creditors of the company?

Answer 22

28 days

Question 23

What happens with respect to creditors?

Answer 23

Creditors to be settled before shareholders
 Usual practice to advertise for claims with statutory notification of
appointment
 Entitled to interest at the official rate, from the date of commencement
 Payment in full within period per DoS

Question 24

When should OH obtain tax clearance from HMRC?

Answer 24

Before distribution to shareholders?

Question 25

What notice is required of distribution to share holders?

Answer 25

NO notice requirement

Question 26

What happens when MVL liquidator forms the opinion that the company will be unable to pay its debts in full?

Answer 26

Before end of period of 7 days beginning with the day after the day on which the liquidator formed opinion make out statement of affairs

Question 27

What happens to the liquidator where MVL to CVL?

Answer 27

The creditors may nominate a [an alternative] liquidator and the [existing] liquidator MUST invite them to do so R6.11:Liquidator must convene a deemed consent or decision procedure  The notice must also contain —  identification and contact details for the existing liquidator; and  a statement that if no person is nominated by the creditors then existing liquidator will be liquidator Be accompanied by a copy of the SofA  Usual rules re: decision notices/ objections apply

Question 28

How many days from when the liquidator forms an opinion that MVL should be CVL does the liq have to give notice to creditors & when must the decision date be?

Answer 28

Creditors must receive 14 days notice Decision date not later than 28 days from opinion (NB no notice etc to members)

Question 29

What happens if sought nomination by deemed consent but more than 10% in value object?

Answer 29

Decision date to be ASARP but no later than 28 days from date of objection threshold met  7 days notice to creditors required

Question 30

When does an MVL convert to a CVL?

Answer 30

From the date:  the company's creditors nominate a person to be liquidator, or  the procedure concludes without a nomination having been made

Question 31

How long do creditors have to propose an alternative IP once they receive notice of decision by correspondence or e voting?

Answer 31

five business days of the notice to creditors  Liquidator then has 2 days to convene a decision procedure

Question 32

What happens if a physical meeting is requested?

Answer 32

Where creditors request a physical meeting, the decision date must be:  within 28 days of the date on which the threshold for requiring a physical meeting was met; and  on at least 14 days’ notice

Question 33

What happens if the creditors nominate another liquidator & another creditor, director or member objects?

Answer 33

Any director, member or creditor of the company may, within 7 days apply to court

Question 34

How long does the liquidator have to deliver notice of the conversion to CVL to creditors?

Answer 34

28 days

Question 35

How long does the liquidator does the liquidator have to file the SA after the completion of the DMP?

Answer 35

5 Business days