Q. What should I do before the company is wound-up?
A. You should take advice from an Insolvency Practitioner prior to the winding-up-hearing as a compulsory liquidation may not be solution to the company's problems.
Q. Who would be appointed liquidator of the company?
A. The order would be made at Court and the Official Receiver would be appointed as liquidator of the company.
The Official Receiver may act as liquidator for the duration of the procedure if the case is relatively straight forward. However, they will seek the appointment of a private sector Insolvency Practitioner should there be more complex issues involved.
Q. Will there be any meetings?
A. The Official Receiver would generally request that the director attend a meeting at their office in order to gain information and records with respect to the company.
If the Official Receiver feels it is appropriate, he may summon a creditors meeting for the purpose of establishing a committee and/or appointing a private sector Insolvency Practitioner to act as liquidator.
Q. Will the Liquidation be advertised?
A. It would be advertised in the London Gazette.
Q. What are the consequences of a winding-up order?
A. Any disposition after the presentation of the petition is void unless consent is received from Court.
After the liquidation has commenced, any legal action that has already commenced against the company is stayed (frozen), unless court gives permission for it to continue.
No new legal proceedings can be brought against the company, without leave of court.
The powers of the directors cease.
Q. What will the bank's reaction be to the issuing of a winding-up-petition?
A. The bank would freeze the bank account as soon as they became aware of the winding-up-petition. However, it could allow receipts to be made into a suspense account.
If the bank has security over any assets, then it could take the decision to appoint an administrative receiver or administrator. However, they will only do this if the amounts are material.
If an individual has personally guaranteed the bank's indebtedness, it could contact them to demand payment. This usually occurs once a Liquidator has been appointed and the bank has more information on which to assess its financial position.
Q. What will happen to the employees?
A. Any employees at the date of the winding - up-order would be dismissed. They would be entitled to claim monies due to them from the Redundancy Payments Office. Once the appropriate forms have been submitted to the liquidator these are sent to the appropriate Redundancy Payments Office and a claim is made from the National Insurance Fund.
Q. What are the Liquidator's duties?
A. The liquidator has the task of realising (selling) all the assets at market value and the proceeds deposited in a designated trust account.
The liquidator will consider the claims of the creditors and following the deduction of fees, payment will be made on the agreed claims in the order of priority.
The liquidator will ensure that all contracts or disputes are completed or brought to a conclusion.
Q. Can the directors or associates of the company purchase the assets from the liquidator?
A. The liquidator's duty is to sell the assets for the highest possible price. There is therefore nothing to prevent the directors submitting an offer for the assets of the company and, if the offer is accepted, purchasing them. If this is the directors' intention, then it must be disclosed at the meeting of creditors and in future reports.
Q. Can the directors of the liquidated company become directors of another company?
A. Your right to be a director or hold a position of trust is not eroded when a company in which you have held a position of trust goes into liquidation. However, this right disappears if you are disqualified from being a director or are made bankrupt.
Q. What action could lead to the disqualification of the directors?
A. trading whilst knowing that the company was insolvent;
paying certain creditors in preference to others. This can include paying monies into the bank account to eradicate an unsecured overdraft;
taking deposits knowing that there was no chance of fulfilling the order;
incorporating a phoenix company and utilising the same or similar name to that of the liquidated company;
placing assets out of the reach of creditors;
allowing transactions at an undervalue (i.e. selling assets at a value which is lower than that which could be achieved on the market);
not maintaining adequate books and records; and
not filing accounts.
Q. Will I be personally liable for the company's debts?
A. When a company is limited, the assets and liabilities belong to the company and the directors are deemed to be officers of that company.
However the director may be personally liable if they have provided a guarantee for any of the company's liabilities or contracts. In addition to this if there has been a breach of the insolvency legislation the directors could be pursued
Q. What is the difference between a voluntary and a compulsory liquidation?
A. A voluntary liquidation, which can be either a members' voluntary liquidation or a creditors' voluntary liquidation, is brought about by resolution of the company and is conducted by a qualified practitioner. A compulsory liquidation is brought about by an order of the court and can be conducted by the Official Receiver or a qualified practitioner.
Q. Do the people in charge of insolvency proceedings hold any kind of qualification?
A. Anyone undertaking the duties of liquidator, administrative receiver, administrator or supervisor of a corporate voluntary arrangement must be a qualified insolvency practitioner. Those holding the position of receiver or manager do not need this qualification, nor does anyone who was already in office before the Insolvency Act 1986 (for England, Wales and Scotland) or the Insolvency (Northern Ireland) Order 1989 (for Northern Ireland) was implemented.