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Creditors' Voluntary Liquidation

The liquidation of a company that cannot pay its debts is called a creditors' voluntary liquidation. The directors of a company initiate this process when a company's liabilities exceed its assets and is insolvent.

The liquidation adivsors at McCarthy Walsh Accountants help directors of insolvent companies make informed decisions to make the best of what is a difficult situation.

Our Dublin liquidators will realise any assets and debtors of the company and deal with all company issues relating to the Revenue Commissioners, banks, creditors, as well as court actions.

Creditors’ Meetings Explained

The creditors meeting takes place at a place and time as advertised in the statutory notices (10 days’ notice by post to creditors and advertised in 2 daily newspapers) and is chaired by one of the directors who may be assisted by an accountant or legal advisor.

The purpose of the meeting is:

Creditors’ Meetings Explained

  • To lay before the meeting a Statement of Affairs of the company.

  • To ratify the nominated liquidator or to give the creditors an opportunity to appoint their own preferred choice of liquidator (outcome dictated by monetary claim of creditors ‘votes’ or proxies).

  • To give the creditors an opportunity to appoint a Committee of Inspection.

Why should a Creditor attend a Creditors’ Meeting?

Why should a Creditor attend a Creditors’ Meeting?

  • To receive a Statement of Affairs and assess the likelihood of receiving a dividend from the Liquidator.

  • To ascertain if any stock left in company which may be recoverable under ‘Retention of Title’ clauses.

  • To nominate your own choice of Liquidator who will be independent and maximise your chances of recovery

  • To nominate yourself on the Committee of Inspection to whom the Liquidator has reporting duties, thereby keeping you informed of the status of the liquidation

  • To assess whether the directors have engaged in reckless trading, and whether there will be an action taken by the Liquidator personally against the directors, which would maximise your recovery.

  • To assess what other customers are hit by the company wind up, which can be useful commercial knowledge in a particular industry (i.e. risk of domino effect of bad debts)

Typical Questions to ask at a Creditors Meeting:

Typical Questions to ask at a Creditors Meeting:

  • Who prepared the Statement of Affairs? (If the nominated liquidator has assisted with this, his independence is in question)

  • When did the company cease trading? (Was there an orderly winding up?)

  • When did the directors realise the company was insolvent? (there may be an issue of reckless trading)

  • When were the last set of accounts filed at the CRO? (Were proper books maintained?)

  • Were there Personal Guarantees in place re company loans? (this brings in the issue of preferential payments in the insolvency period)

  • Will the directors continue the business through another company? (This brings in the issue of the Phoenix Company syndrome and what assets are at stake which if purchased by the directors, must be an arm’s length transaction at market value.

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Steps To Follow In Preparing A Company For Liquidation

The liquidation of a company can be a difficult and stressful time for directors. Nonetheless, it is important that the directors seek professional advice to ensure that they meet their legal obligations and organise an orderly windup.

After obtaining advice and agreeing the appointment of a liquidator, the directors will send out to all creditors the statutory notice of the creditors meeting allowing 10 clear days notice (templates usually provided by nominated Liquidator). The statutory notice must also be advertised in two daily newspapers.

It is important that the directors have access to the registered address of the company to access post for returned proxy forms. It may be necessary to change this address if the directors do not control the registered office.

Between the date of the decision to wind up the company and the appointment of the Liquidator at the creditors meeting, the Directors should undertake the following steps:

Steps To Follow In Preparing A Company For Liquidation

  • the employees should be made redundant

  • company assets should be secured (it may be necessary to change locks/alarm codes)

  • if there are bank loans/overdrafts, the directors should deposit any receipts in a separate bank or solicitor client account

  • no payments should be made from the existing bank account, and recurring utility payments should be cancelled (eg staff phones)

  • The directors may have to deal with creditors who attempt to enforce Retention of Title over stocks. It is advisable to seek legal advice before agreeing any claims; best practice is to leave for the Liquidator to review that creditors have valid claims.

There are instances where it is justifiable to continue to trade for days or weeks between the time of taking insolvency advice and sending out the statutory notices (say to complete a project and realise funds). In this scenario it is important that directors undertake the following steps :

Separate any stock which is subject to Retention of Title

separate any stock which is subject to Retention of Title

  • Only retain key employees (surplus staff should be made redundant and will have statutory entitlements which will be processed by the incoming Liquidator).

  • New supplies should be obtained on a Cash on Delivery basis, so as to ensure they are not drumming up more company debt.

In the interval between sending out notices to creditors regarding the creditors meeting and the meeting itself, the directors will have to prepare a Statement of Affairs to present to the creditor attendees at the meeting.

This in effect, is an up to date statement of the assets of the company with the book values and realisable market values on liquidation. It should also include a list of creditors with the amounts owed.

The directors will often obtain the assistance of their accountant in preparing the Statement of Affairs. This is not a legitimate pre-liquidation expense, but may be invoiced to the Liquidator once ratified.

The Directors will also have to prepare a written statement to be read to the creditors at the meeting outlining a brief history of the company including:

The Directors will also have to prepare a written statement to be read to the creditors at the meeting outlining a brief history of the company including:

  • Incorporation date

  • Location of registered office

  • Directors and shareholders details

  • Nature of the business

  • Trading details

  • Reasons for company collapse

Members’ Voluntary Liquidation

A members’ voluntary liquidation is where a solvent company distribute assets and cash left in the company to shareholders before winding down. We can

help shareholders extract funds in a tax efficient manner from a company that is to cease trading where capital gains would be applied.

Monies taken out as a dividend or salary pre-liquidation would be taxed at the shareholders marginal income tax rate. Get in touch with us to arrange a consultation.

Have a question for our liquidation team? Get in touch with us

Frequently Asked Questions

  • How much do your liquidator services cost?

    It is the duty of directors to fund a creditors’ voluntary liquidation if there are no debtors or realisable assets in the company. Get in touch with McCarthy Walsh Accountants to organise consultation.

  • How long does the liquidation take?

    A straightforward liquidation can be completed within 12 months provided directors have acted responsibly and honestly and that assets can be disposed of easily. More complicated liquidation can take a number of years depending on the individual circumstances of the case.