practitioner > Chapter 25 > Voluntary Liquidations
1. Rule 4.219 of the Insolvency Rules 1986 provides:
A practice appears to have arisen of voluntary liquidators, on ceasing to act in consequence of a winding-up order, deducting outstanding costs and expenses of the voluntary liquidation, and outstanding remuneration, and remitting only the balance of funds left (if any) to the OR, who is then obliged to apply to court to challenge the amount deducted.
In our view, where a voluntary liquidator, on ceasing to act contends that there are expenses which he has properly incurred and which should be repaid, or has earned remuneration not yet received, it is his responsibility to apply to the court under Rule 4.219, and not that of the OR. Any expenses or remuneration outstanding at the point when the voluntary liquidator ceases to act should not be deducted from the balance remitted to the OR.
(First published in Dear IP no. 31, August 1994)
2. Disciplinary Proceedings Arising from Breach of Regulation 5(2) of the Insolvency Regulations 1994
The Service has complained to a practitioner's professional body about funds he had retained which ought to have been remitted to the ISA under Regulation 5(2). The professional body took disciplinary proceedings against the practitioner and the complaint was proved, on the practitioner's own admission. The practitioner was censured, fined £10,000, and ordered to pay costs of £500.
Although this case was exceptional in that it involved substantial funds, it is a reminder to practitioners that the Service considers the non-payment or late payment of funds into the ISA to be a serious matter. Practitioners are also reminded that persistent failure to adhere to the guidance relating to the remittance of funds, or a failure involving substantial funds, will result in further action by the Service. That may include, where appropriate, referral to the practitioner’s professional body.
Contact: Gareth Limb, insolvency practitioners Control Unit, The Insolvency Service, 5th Floor, Ladywood House, 45/46 Stephenson Street, Birmingham B2 4UZ (telephone 0121 698 4000)
(First published in Dear IP no. 46, July 1999)
3. Regulation 5(2) of the Insolvency Regulations 1994
This Regulation provides that in the case of a voluntary winding up the liquidator shall, within 14 days of the expiration of the period of six months from the date of his appointment and of every six months thereafter, pay the balance of funds in his hands not required for the immediate purposes of the liquidation into the Insolvency Services Account (ISA).
Some practitioners have interpreted this regulation as only relating to Creditors Voluntary Liquidations. In fact, it relates to both forms of voluntary liquidation, and accordingly liquidators of companies subject to Members’ Voluntary Liquidations must pay monies into the ISA as appropriate.
Practitioners should now ensure that they have adequate systems in place to enable them to comply with the above requirements.
(First published in Dear IP no. 39, October 1997)
The Companies Act 2006 has made
various changes to the rules relating to company meetings and
practitioners should note that some of these changes affect the
resolutions that need to be taken to put a company into liquidation.
Some of the new provisions are subject to contrary provision in the
company’s articles, and some of them are not.
With effect from 1 October 2007,
section 84(1)(c) of the Insolvency Act 1986 was repealed.
This was the section which provided that a company may be wound
up voluntarily ‘if the company resolves by extraordinary resolution to
the effect that it cannot by reason of its liabilities continue in
business and that it is advisable to wind up’.
Accordingly, with effect from that date any winding-up
resolution, whether or not the company is insolvent, needs to be taken
as a special resolution under section 84(1)(b).
This is not subject to any contrary provision in the company’s
Furthermore, the period of notice
required for a meeting of a private company at which a special
resolution is to be proposed was reduced from 21 days to 14 days under
section 307(1) of the Companies Act 2006 (‘the Act’), also with
effect from 1 October 2007. However,
under section 307(3) of the Act the company’s articles of association
may specify a longer period of notice.
Meetings of a private company may
be called on shorter notice where a majority of the members who hold 90%
of the voting rights agree. However, the company’s articles of
association may specify a higher threshold.
For a public company, a 95% majority is required.
With effect from the same date, references to
extraordinary resolutions in section 165 of the Insolvency Act 1986
(powers of liquidator in voluntary winding up) were replaced by
references to special resolutions.
Any enquiries regarding the above should be directed
toward Toby Watkinson, IP Policy Section, Area 5.7, 21 Bloomsbury
Street, London, WC1B 3QW; telephone: 020 7637 6566; email: firstname.lastname@example.org
General enquiries may be directed
Telephone: 0207 291 6772
Section 98 of the Insolvency Act 1986 (“the Act”) provides that a company may nominate a liquidator for the purposes of a creditors voluntary winding up. Where members of a company have made such a nomination, section 166(4) of the Act is clear in that the liquidator shall attend the creditors’ meeting held under section 98 and report to the meeting on any exercise by him of his powers.
It is our view that these provisions do not allow the liquidator to delegate his attendance at such a meeting to suitable qualified colleagues. Whilst there are provisions in place for the delegation of the liquidator’s attendance in certain other circumstances, these do not apply to meetings held under section 98 of the Act.
Section 166(7) of the Act provides that if the liquidator “without reasonable excuse” fails to comply with the section he is liable to a fine. The reasonable excuse test should not be used for the purposes of avoiding attendance at a section 98 meeting, but rather may be deployed to avoid the incursion of a fine. In this instance, the relevant fine that can be imposed for breach of the section is the statutory maximum. It follows that only in exceptional circumstances do we believe it would be appropriate for a liquidator to send a colleague to a section 98 meeting in his place, for example an unforeseen illness/medical appointment or possible attendance at court. In our view it is not appropriate for a liquidator to avoid attendance at such a meeting purely on the basis of administrative convenience.
Any enquiries regarding this article should be directed towards Toby Watkinson, IP Policy Section, Area 5.7, 21 Bloomsbury Street, London WC1B 3QW; telephone: 020 7637 6566; email: email@example.com
General enquiries should be directed towards IP Policy Section, Area 5.6, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7291 6772; email: IPPolicy.Section@insolvency.gov.uk
Rule 4.49C – CVL of the Insolvency Rules 1986 sets out the periods for which a liquidator must produce a progress report. Rule 4.49C – CVL(3) covers the period when a liquidator ceases to act and states:
(a) the prescribed period for which the liquidator must produce a progress report ends on the date of that liquidator’s ceasing to act, and
(b) the prescribed period for which the new liquidator (if any) must produce a progress report is the period of 1 year commencing immediately after that date and every subsequent period of 1 year (subject to the further application of this paragraph when that new liquidator ceases to act).
The purpose of this article is to provide clarity in the circumstances where there are joint appointees and the resignation of an appointee leaves or one more original appointee in office. Where there are joint liquidators and one leaves office, the progress report drafted when they leave will be completed in the name of all appointees at that date and future progress reports would be twelve months after that, for all new and/or continuing office holders. There should be not be two timelines in place for new and continuing appointees.
Where a voluntary liquidator leaves office within the first twelve months of the liquidation, the wording of Sections 92A and 104A means that no progress report is required to the date of the departing liquidator ceasing to act. Rather, their activity will be rolled up into the first progress report under those sections by the new and/or continuing liquidators.
Any enquiries regarding this article should be directed towards Catherine Collinson, IP Policy Section, Area 3.7, 21 Bloomsbury Street, London WC1B 3QW; telephone: 020 7291 6873; email: firstname.lastname@example.org
General enquiries may be directed to email IPPolicy.section @insolvency.gov.uk
Rule 4.126(1E) and rule 4.126A(4) of the Insolvency Rules 1986, as amended by the Insolvency Amendment Rules 2010, states that the liquidator’s report of the winding up is a report that is laid before the final meeting.
However Companies House has been receiving copies of the draft reports which were sent to creditors or members prior to the final meeting taking place. Companies House requires a copy of the report which was laid and agreed by creditors or members at the final meeting.
This should include the outcome of the final meeting as per Rule 12A.47(1) of the Insolvency Rules 1986 and also specify the dates of the opening and closing of the winding up (i.e. to the date of the final meeting) as per Rule 12A.47(2).
Insolvency practitioners are asked to ensure that they send the final report laid before creditors and members which includes the required information as set out above to Companies House and not the draft copy which was sent prior to the meeting.
This will save the time, effort and additional cost incurred by insolvency practitioners having to revisit documents which are returned to them for correction by Companies House.
Any enquiries regarding the above should be directed towards Alun Howells, Policy Section, Companies House, Crown Way, Maindy, Cardiff CF14 3UZ, Telephone: 02920 308184, email: email@example.com
General enquiries may be directed to email IPPolicy.Section@insolvency.gov.uk Telephone: 020 7 291 6772
This article is being issued to clarify the position regarding the period of a progress report under R4.49C when there has been a change in liquidator or there are joint appointees.
In a CVL where there are joint appointees and one ceases to act within the first 12 months, the wording of Section 104A means that the reporting requirement has not come into effect by the time of the cessation and so no progress report is required – Section 104A (1)(a) and Rule 4.49C(2) (which determines the prescribed period) have no effect at that point. Once 12 months has passed the remaining appointee(s) has a reporting requirement under Section 104A and must report for the first 12 month period as normal.
Where there isn’t a joint appointee but a new liquidator replaces one who ceases to act within the first 12 months, the same interpretation applies to the departing liquidator i.e. he has no reporting duty on cessation. Once 12 months has passed the liquidator in office has a duty to report under section 104A and rule 4.49C (2) will then apply. Such a report will be for one year from the date of the appointment of the first liquidator i.e. from the commencement of the liquidation and will include the activity of any liquidator who ceased to act within that first 12 months. In this way there will be no gap in the reporting cycle and it is on this basis that Companies House expect to receive progress reports in such circumstances.
Any enquiries regarding this article should be directed towards Joseph Sullivan 4 Abbey Orchard Street London SW1P 2HT, telephone: 0207 637 6495 email: firstname.lastname@example.org
General enquiries may be directed to email IPregulation.Section@insolvency.gov.uk