Role of a Liquidator
Once a Company enters into Creditors Voluntary Liquidation, the Insolvency Practitioner you have been dealing with will formally be appointed as Liquidator of the Company. As a result there are several statutory duties placed on the Liquidator that must be completed in every liquidation.
The Liquidator’s foremost duty is to realise the assets of the Company for the benefit of the liquidation estate.
Assets of a Company can range from office equipment to stock, property debtors and cash and therefore a Liquidator must make an assessment of the way to sell or collect said assets to ensure they maximise the realisation. If assets are of value and cannot be secured by an Agent, a Liquidator will commonly insure the asset to ensure its value is protected.
One method of realisation is for a Director of the liquidated company or an associated party of the liquidated company to make an offer for the assets of the Company. This is usually advantageous to the liquidation estate as, for instance, second hand office equipment is usually more valuable to someone who is familiar with it than being sold second hand at an auction. An Agent would need to review the offer made by the party to ensure that it was of such value that a different method of realisation would not produce a better outcome for the Liquidation Estate.
Another method of realisation, if there were numerous assets, would be to instruct an Agent to deal with a collection for sale at auction or an on site auction if the assets warranted it. In certain circumstances the assets of the Company may be best sold as a ”job-lot” to be able to maximise the overall realisations.
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Report on Directors’ conduct
One of the Statutory duties placed on a Liquidator is to produce a report on the conduct of the Directors of the Company (including anyone who has been a Director of the Company in the 3 years preceding liquidation).
This is not a criticism of individual Directors and is done in every liquidation. The purpose of the report is to ensure the Insolvency Service can assess whether the Directors of the liquidated company were materially responsible for the Company’s demise by acting against the Company’s interests and take action against Directors in the cases where they have.
This report takes the form of an online questionnaire that the Liquidator completes for the Insolvency Service. This will be completed using information that has come to light during the investigation of the Company’s affairs (explained below) and any information that has been presented to the Liquidators by third parties (such as creditors). The contents of the Report are confidential.
Another of the statutory duties of the Liquidator is to conduct an investigation into the financial affairs of the Company. The purpose of the investigation is to understand whether any “antecedent transactions” have taken place and take the necessary action against the parties involved if they have.
The most common antecedent transactions are Preference Payments and Transactions at an undervalue.
A preference payment is where a Company pays a creditor, in the two year period prior to liquidation or administration if they are a connected party or 6 month period if they are unconnected, with the desire to put them in a better position that the other creditors whilst the Company is insolvent.
A transaction at an undervalue is where a transaction is entered into, in the two year period prior to liquidation or administration if they are a connected party or 6 month period if they are unconnected, that is for significantly less than the consideration supplied by the Company.
Should such potential payments be located then the liquidator will contact the Director with a list of the queried payments to try and understand if there is an alternative explanation. If the transactions are confirmed to be as suspected, then the Liquidator will seek repayment of the relevant amounts by the Director or beneficiaries to the liquidation estate.
If a Company has employees with outstanding amounts due to them for Redundancy, Notice Pay, Holiday Pay or Arrears of wages then the employee will be able to claim those amounts from the Redundancy Payments Service (“RPS”) once the Company is in liquidation.
Once the Company is in liquidation, the Liquidator will submit the relevant forms to the RPS to advise of the amounts due to the employees as outlined by the Company’s records. This will enable the RPS to corroborate the claims made by the employees and ensure that each employee receives the correct amount.
Dealing with Creditors
Once a company enters into liquidation all correspondence creditors have must be redirected to the liquidator to deal with. A creditor is no longer allowed to contact a Director once the Company is in liquidation.
A liquidator must advise creditors of their appointment within 28 days and must provide annual progress reports within two months of the anniversary of their appointment to keep creditors up to date. Creditors are able to request more frequent updates, but a liquidator must decide whether doing so unfairly affects the liquidation estate by adding unnecessary time costs for the sake of an update to one creditor. This will of course need to be decided on a case by case basis.
When you get in touch with us, you will speak directly to a licensed Insolvency Practitioner from the outset. We will take the time to understand your Company’s financial position, what your future intentions are for the business and ultimately what outcome you are hoping for.
If you feel your Company needs the immediate protection provided by Administration we are able to help so please call us to discuss your options in more detail.
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