Liquidation creditors meetings can be a stressful prospect for company directors. We talk through the process in detail here to help you know what to expect and what will be required of you.
Prior to entering liquidation
Once we have agreed with the board of directors that a voluntary liquidation is the most appropriate route, we will agree a suitable date and time for the liquidation creditors meetings. This is generally between 9 and 21 days time.
We will send notice to:
Once the notices are submitted:
At this stage the company should have completely ceased trading. As a director you should ensure:
In readiness for the liquidation meetings, our staff will work with you to prepare
These documents will be put to the creditors at the creditors’ meeting.
Our creditor meetings are held on a remote basis meaning you can attend the meeting by telephone or by SKYPE. Normally between 9 and 21 days notice is given for the meetings, and both the shareholders and the creditors meetings are usually held on the same day; the creditors’ meeting is usually held straight after the shareholders meeting finishes. Our liquidation timeline will give you an idea of how this might work for you.
Meeting of shareholders
This is the first of the two liquidation meetings. Contrary to popular belief it is the shareholders of the company and not its creditors that decide whether a company is placed into liquidation.
The following will happen at the shareholders meeting:
In practical terms, one or more shareholders attend by telephone, and those who want to vote but cannot attend will vote by proxy.
The company is placed into liquidation at the shareholders meeting, and the creditors’
meeting follows straight on
Meeting of creditors
Creditors’ meetings now take place in any of the following formats:
The creditors’ meeting usually lasts approximately 40 minutes, but if there are complicated issues that arise in discussions with the creditors, this can increase to a couple of hours.
Although we have yet to see this happen, creditors with a large enough vote do have the right to request a physical meeting which can take place at:
You, or another director of the company, will be the chair of the meeting however the appointed liquidator will generally conduct the meeting on your behalf.
The following business matters will be covered:
Questions from creditors
The questions must be topical and must be linked to the company which is being placed into liquidation. You should attempt to answer any questions in a professional manner and try to answer the points raised by the creditors. The liquidator will intervene if the line of questioning becomes inappropriate, as creditors are also expected to conduct themselves in a professional manner. (Any threats of violence or bad language are grounds for being ejected from the meeting.)
Creditors may choose to have a solicitor or insolvency practitioner attend the meeting to raise questions on their behalf. Likewise, a director may choose to have their solicitor present to advise them in relation to their answers. In practical terms, we try to guide the meetings so that there is a fair balance reached between directors and creditors concerns.
A liquidator is required to investigate the actions of the directors of the company prior to liquidation. As a part of this investigation, the liquidator will ask the creditors if there are any matters they would like to raise for investigation.
Many creditor’s concerns will have a straightforward explanation, however, if there is an action you are concerned about you should discuss it with us as soon as possible.
Nominations for Liquidator at the creditors meeting
Creditors may choose to nominate another person to act as liquidator at the meeting instead of the shareholders’ choice. Although this is quite rare, creditors may choose to do this for a number of reasons:
The liquidator is chosen by whoever gets more than 50% of the vote of the creditors at the meeting.
It’s possible that if three or more creditors are represented at the meeting, they may choose to form a liquidation committee. The purpose of a liquidation committee is to:
The meeting will end at this point if a committee is formed.
If no committee is formed, we will often seek to establish the basis of the post-liquidation fees at this stage. Please note that the directors are not liable for these, rather they are payable out of any assets that are realised within the liquidation. If no further assets are realised, no further fees are drawn regardless of the resolution passed.
Closure of the creditor’s meetings
Once all of the above resolutions have been dealt with, the meeting will be brought to a close. We need to make sure the chair has signed all of the documents for the meeting at this stage. If the meeting was held remotely, the director will need to immediately provide the documents signed to our office.
Although meetings are of course particular to each case, the above should give you a clearer idea of what to expect. However, if you have any questions, contact one of our business rescue experts directly.