The members (shareholders) of a company can voluntarily put their business into liquidation, and if the directors declare that the assets are sufficient to pay the creditors in full within 12 months then a Members Voluntary Liquidation follows.
We can act as liquidators in solvent liquidations, but where these are being carried out for tax reasons we would only be prepared to do so if we were satisfied that proper tax advice was being followed. We do not have sufficient in-house tax expertise, but can recommend tax experts if necessary.
We also take appointments in insolvent liquidations, or as receivers appointed on behalf of secured lenders. However, our involvement at an early enough stage might help to ensure the survival of all or part of the business.
An insolvent liquidation can start by the Court making a winding-up order (a compulsory liquidation), or by the shareholders passing a resolution to wind-up and then by meetings of members and creditors being held (a creditors voluntary liquidation).
Liquidation proceedings are regulated by the Insolvency Act 1986, and a petitioning creditor need only have a debt of £750. However, there is no Official Receiver in Scotland and a liquidator may only accept appointment if the petitioning creditor agrees to meet any shortfall in his costs. We are prepared to act as Provisional Liquidators to determine if there are any assets before the decision need to be taken whether to seek a winding up order. However, some Sheriff Courts disapprove of this speculative appointment and in this event - for a company which is continuing to trade - we would recommend seeking the appointment of an Interim Liquidator, but withholding advertisement until the debtor company has the opportunity to respond to a faxed copy of the proposed advertisement.
Duties of the Liquidator
A provisional liquidator can be appointed to safeguard the assets whilst the Court decided what to do. When it makes a winding-up order the Court appoints an interim liquidator who has to call a meeting of creditors. The creditors then get to vote on who the liquidator is going to be.
The liquidator is appointed to wind-up the company’s affairs. He usually has to sell the company’s assets, but if authorised to do so he can distribute the assets of the company in specie. The expenses of the liquidation are paid first, and thereafter dividends are paid to creditors. If there are surplus funds, these are distributed to the shareholders.
Liquidations have to be advertised in the Edinburgh Gazette, as well as notice being filed with the Accountant in Bankruptcy.
The liquidator has to send the Statement of Affairs to the Accountant in Bankruptcy. He also has to lodge accounts after 12 months, and every six months thereafter. When the liquidation is complete, a final return is sent in. The company is usually dissolved three months after the final return. Copies of the documents are available from the Accountant in Bankruptcy.