- Modernise how the liquidator communicates with creditors, allowing for virtual as opposed to physical meetings, and permitting the use of modern communications such as email
- Abolish many of the standard form insolvency documents, enabling the liquidator to include only what is needed for the specific assignment, making reports more relevant to creditors
- Improve confidentiality – for example the addresses of employees and consumer creditors have to be excluded from reports that go into the public domain longterm.
The stages of the liquidation
You still need a licensed insolvency practitioner to liquidate your company, he/she is appointed as liquidator. The three stages involved within the old liquidation process remain unchanged. They are:
1: Directors’ meeting
The directors have to meet and agree that the company is insolvent and should be placed into liquidation. They also choose a liquidator.
2: Shareholders’ meeting
The shareholders meet and pass a special resolution to put the company into liquidation. As with the previous legislation, a 75% majority is required. At least 14 days’ notice has to be given in writing to the shareholders but if 90% agree, it can be held immediately. The Centrebind procedure – whereby a company is put into liquidation straight away to defeat creditor action – is still available. Also, the company can be put into liquidation by written resolution.
3: Creditors’ consultation
The main change to the old rules is that there is no physical meeting of creditors at the start of the liquidation. There are only two options:
A: Call a virtual meeting of creditors…
… giving at least seven days’ notice and details of how to virtually attend (say by video conference or by telephone). One of the directors of the company will have to attend the liquidator’s offices at the time of the meeting to answer creditors’ questions and then sign the paperwork (the amount of paperwork doesn’t get any smaller!). Creditors are not allowed to physically attend even if they want to!
B: Send a notice of deemed consent to creditors…
… giving at least seven days’ notice. Deemed consent means creditors are not given a chance to attend remotely or by telephone. If 10% or more of creditors (by value or in number) want a physical meeting, they can request one and a physical meeting has to be held. This creates an additional seven-day delay.
Notice can be given to creditors of the chosen process above by email if they are known email users. This can save time and money.
Report/statement of affairs
Under the new rules a report must be sent to all creditors before the virtual meeting/deemed consent, setting out the company history, the statement of affairs and some other statutory information. The statement of affairs has to be physically posted (but unusually everything else can be emailed or made available online with access details given to creditors!). Previously, all of this was only available for the first time at the creditors’ meeting.
And those are the new rules! More paperwork, not less, and not particularly innovative, but what do you expect when accountants and civil servants get together to rehash the law?