Part 2 – Matters applicable to all voluntary liquidations
January 2014
56.3.6 Circumstances in which a company may be wound up voluntarily
A company may be wound up voluntarily where:
56.3.7 Meeting to consider a resolution for voluntary liquidation
To wind up a company a general meeting at which the resolution for voluntary winding up will be proposed must be called. Notice of the meeting stating the type of resolution proposed must be given to all members entitled to vote at least 14 days prior to the meeting in a private company, although the company’s articles may require a longer notice period. If the meeting is held at short notice the period can be waived by the agreement of 90% of the members present or by a higher percentage if specified in the articles of association [Note 2].
56.3.8 Holder of a qualifying floating charge to be given notice
The holder of a qualifying floating charge who is unable to appoint an administrative receiver (see paragraphs 56.1.27 and 56.2.21) must be given written notice of the intention to pass a resolution to voluntarily wind up the company [Note 3].
56.3.9 Resolution for voluntary liquidation
Depending on the circumstances (see paragraph 56.3.6) members can pass an ordinary or special resolution to voluntarily wind up a company. An ordinary resolution is passed by a simple majority of members present or represented and voting [Note 4]. A special resolution requires a 75% majority, by value [Note 5].
56.3.10 Notice of resolution to wind up a company
A copy of the resolution to wind up the company voluntarily must be forwarded to the Registrar of Companies [Note 6] within 15 days [Note 7] and advertised in the London Gazette within 14 days [Note 8].
56.3.11 Commencement of the winding up
The winding up of the company commences when a valid resolution for winding up has been passed, irrespective of whether a liquidator has been appointed [Note 9]. This date is important where the liquidator is considering potential recoveries from preferences or transactions at an undervalue (see Chapters 31.4A and 31.4B) [Note 10]. The two-year period within which disqualification proceedings may be started begins from the date the resolution was passed [Note 11].
56.3.12 Company status in liquidation
From the commencement of the voluntary winding up the corporate status and corporate powers of the company continue until the company is dissolved unless its articles of association say otherwise. Any act carried out by the liquidator is carried out in the name of the company and not in his own name. This includes the company continuing to trade where the liquidator considers it beneficial for the winding up [Note 12].
56.3.13 Appointment of a liquidator
The appointment of any liquidator agreed at a meeting of members or creditors takes effect immediately. The chairman of the meeting must certify the appointment of the liquidator once the liquidator has delivered to him/her
The chairman must be satisfied the liquidator has security for the proper performance of his functions (see paragraphs 17.7 to 17.12 for further details).
56.3.14 Notice of liquidator’s appointment
The liquidator must give notice of his/her appointment to the registrar of companies and advertise the appointment in the London Gazette within 14 days of his appointment. If the liquidator fails to comply he/she is liable to a fine [Note 14].
56.3.15 Duties of the liquidator
The duties of the liquidator are:
56.3.16 The powers of the liquidator
The liquidator has wide ranging powers which are explained in Schedule 4 to the Insolvency Act 1986 [Note 20]. These powers include:
56.3.17 Additional powers of the liquidator
A liquidator is an "office-holder" and as such has the following additional powers:
56.3.18 Vacancy in the office of liquidator
Where a vacancy occurs in the office of liquidator it can be filled in a general meeting by the members in a members’ voluntary liquidation, or the creditors in a creditors’ voluntary liquidation [Note 30]. Where the court appointed the liquidator on an application to the court by a member or creditor it would appear that the court has to approve the new liquidator [Note 31].
56.3.19 Removing the liquidator
The liquidator may be removed from office only by:
56.3.20 Costs and expenses of the liquidation
All the liquidator's expenses, including his /her remuneration are payable out of the company’s assets in priority to all other claims if properly incurred [Note 34].
56.3.21 Distribution of the company's assets
The company’s property must, after payment of the liquidation costs and expenses together with the preferential debts (see Part 4 of Chapter 40 for further details), be applied pari passu (where payment in full does not apply) in satisfaction of all the company’s liabilities. For further details of the order of payment see Chapter 36 [Note 35].
56.3.22 Electronic communication by the liquidator
Where the liquidator is required by the Act or the Rules to give, send or deliver any notice or document he/she may use electronic means to do so provided that the intended recipient has consented to such delivery and provided an electronic address for this. The liquidator could, for example, issue the progress report by electronic means (see paragraph 56.3.26). Any document delivered by the liquidator electronically must contain a statement that a hard copy may be requested and give contact details for making such a request [Note 36].
56.3.23 Communication with creditors by the liquidator via website
The liquidator may satisfy his/her statutory requirement to give, deliver or send a notice or document by making the information available for viewing or downloading on a website. The liquidator could, for example, put the progress report on a website (see paragraph 56.3.26).The liquidator must notify creditors of the website address and any required password. Creditors must be advised of their right to request a hard copy of the report and be given contact details for making such a request. Information placed on a website by the liquidator must remain available for a period of at least 3 months from the date of the notice [Note 37].
56.3.24 Annual meetings of the company and its creditors (pre-6 April 2010 liquidations only)
Where the resolution for voluntary winding up was passed before 6 April 2010 and the voluntary liquidation continues for more than one year the liquidator must summon a meeting of the company. Where the liquidation was a creditors’ voluntary liquidation a meeting of the creditors must be called. The meeting must take place at the end of that year and any subsequent year. The liquidator must inform the meetings by giving an account of his acts and dealings and a report of the conduct of the winding up [Note 38].
56.3.25 Pre-6 April 2010 member’s only liquidations
A requirement of a members’ voluntary liquidation is that all creditors are paid within 12 months of the resolution to wind up (see paragraph 56.3.38). A meeting of the company will only be held where there are matters still outstanding at the end of 12 months, for example, where a tax liability has yet to be ascertained or a return to shareholders has not yet been made [Note 39].
56.3.26 Annual progress reports – liquidation commenced on or after 6 April 2010
Where the resolution for voluntary winding up was passed on or after 6 April 2010 and the voluntary liquidation continues for more than 1 year, the liquidator must produce a progress report for each year from the date of appointment until he/she ceases to act. Within 2 months from the end of the period of the report, the liquidator must send a copy of the progress report to the members, the creditors and the registrar of companies [Note 40].
56.3.27 Annual progress report- contents
The progress report must include a receipts and payments account, details of how the liquidator’s remuneration was fixed, a statement of the remuneration charged and expenses incurred. The report must advise members and creditors of their right to request further information under Rule 4.49E and their right to challenge the remuneration and expenses under Rule 4.148C (MVL) or Rule 4.131 (CVL) [Note 41].
Once the company’s affairs are fully wound up the liquidator must prepare an account of the winding up. This account must show how the liquidation has been conducted and how the company’s property has been disposed of. The liquidator must call a general meeting of the company, and in a creditors’ voluntary liquidation, a meeting of the creditors, for the purpose of providing to it the account and giving an explanation of it. If the liquidator fails to call final meetings as required he/she is liable to a fine [Note 42].
56.3.29 Advertising the final meetings
The general meetings of the company and its creditors (if applicable) must be called by advertisement in the London Gazette. The notice to specify its time, place and object. At least one month’s notice is required [Note 43].
56.3.30 Final return to registrar of companies
The liquidator must send to the registrar of companies a copy of the account, and make a return to him of the holding of the meeting and of its date within a week of its conclusion. If a quorum is not present at the meeting, the liquidator must, in lieu of the return mentioned above, make a return that the meeting was duly summoned and that no quorum was present. If the copy of the account is not sent, or the return is not made the liquidator is liable to a fine and, for continued contravention, to a daily default fine [Note 44].
56.3.31 Resignation and release of the liquidator
The liquidator must submit his/her resignation to a meeting of creditors [Note 45]. The liquidator’s resignation and release becomes effective when he/she gives notice to the registrar of companies [Note 46].
56.3.32 Removal and release of the liquidator
The liquidator vacates office if he/she ceases to be qualified to act as an insolvency practitioner [Note 47]. The liquidator may be removed from office by:
Where the liquidator has died or is removed from office by a general meeting of the company or creditors (with no resolution against his release) he will be released when notice is given to the registrar of companies [Note 49]. Where the liquidator has been removed from office by the court or by a meeting of creditors who resolved against his/her release, he/she must apply to the Secretary of State for his/her release [Note 50].
56.3.33 Release of the liquidator after final meetings
The liquidator obtains his/her release and vacates office when he/she submits his return of the final meeting(s) to the registrar of companies [Note 51]. Where a creditors’ meeting votes against his release he/she must apply to the Secretary of State [Note 52].
Where the liquidator obtains his/her release he/she is discharged from all liability in respect of any actions or omissions committed during the winding up. The release of the liquidator does not prevent any action being taken against him/her for any misfeasance or breach of trust during his/her period of office [Note 53].
56.3.35 Remedy for misfeasance or breach of trust by the liquidator
The official receiver, liquidator, creditor or contributory of the company may apply to the court to examine the conduct of the voluntary liquidator or former voluntary liquidator. Where the court finds that he/she has misapplied or retained any money or other property of the company, been guilty of any misfeasance or breach of any fiduciary or other duty in relation to the company, it can order him/her to:
56.3.36 Dissolution of the company
When the liquidator has sent a copy of his final account and return to the registrar of companies (see paragraphs 56.3.28 to 56.3.33) the company will be dissolved three months by the registrar after registration of the return. The liquidator or any other interested person may apply to the court for an order deferring the date of dissolution [Note 55].
[Back to Part 1 Background and definitions] [On to Part 3 Members’ voluntary liquidation]