The role of the liquidator is to dispose of the insolvent company’s assets and distribute the proceeds fairly amongst creditors once the fees, charges and additional expenses of the liquidation have been deducted.
But how do these fees get approved?
I’ll cover the process by which insolvency practitioners gain creditor approval below.
The office holders’ fees are always discussed at the initial shareholders’ meeting.
At this meeting, the directors take a number of resolutions, including winding up the company, nominating a liquidator, and fixing the liquidation fees.
At this time, the liquidator ensures that everyone fully understands the basis for fixing the liquidation fees. He or she may provide supporting documents for further clarification.
One key objective of the meeting is to reach an agreement that the fees proposed by the liquidator are a fair and reasonable reflection of the work that needs to be done to wind up the company.
Creditor Approval
The day after the shareholders’ meeting, directors have seven days to deliver a notice to creditors, with the details of the meeting process. The notice requests that creditors vote on proposals or resolutions taken during the shareholders’ meeting.
Creditors can agree or disagree with the proposals by casting their votes via one of the official ‘qualifying’ or decision-making methods.
Creditors can complete and return the voting form via correspondence or email, or using an electronic system, such as Survey Monkey.
They can attend a virtual meeting, typically a conference call or video conferencing platform, such as Google Hangouts.
Deemed Consent
A system of ‘deemed consent’ has been introduced where creditors are now ‘deemed to have consented’ to a decision or resolution if 10% of creditors (by value) have not objected to it. In other words, if objections are not received by the ‘decision date’, creditors are ‘deemed to have consented’ to the decision or resolution.
In line with the new rules, deemed consent cannot be used to approve the liquidator’s fees. In the scenario where the deemed consent process has been used to approve the liquidator’s appointment, another qualifying procedure will be required to vote on fees, such as correspondence or email, electronic voting or a virtual meeting.
Physical Meetings
Creditors can object to a virtual meeting in favour of a physical, face-to-face meeting to vote on the liquidation fees if they can meet the 10/10/10 rule. This means that 10% of creditors (in value) or 10 individual creditors, or 10% of creditors (in number) must support the request for the meeting to go ahead.
Need Advice?
If insolvency is looming over your business, the best course of action is to contact an insolvency practitioner sooner rather than later for a better chance of rescuing the business.
For more guidance on a director-led voluntary liquidation, please call 0800 074 6757 or email info@companydebt.com for free and confidential advice from one of our professional advisers.
