Liquidator

Image Courtesy: http://bridgenewland.com/close-down-liquidation/

COMPULSORY LIQUIDATION

What are the powers of the liquidator?

A liquidator's powers are wide and include powers to sell the company’s assets, to bring and defend legal proceedings and to pay dividends to the company’s creditors. Some of the liquidator’s powers can only be exercised with the agreement of the liquidation committee (or if none the DTI) or the court.

Does the liquidator pay unsecured creditors the money owed to them?

Secured and preferential creditors are paid before unsecured creditors. Secured creditors are those that have some form of security over a company’s property (for instance a bank with a fixed and floating charge debenture). Secured creditors are entitled to be repaid their debt out of the proceeds of sale of the secured assets in priority to ordinary unsecured creditors.

Preferential creditors are a special category of unsecured creditor. They consist mainly of certain debts due to employees and the Redundancy Payments Service and are paid in priority to all other unsecured creditors.
The liquidator will pay a dividend to unsecured creditors if enough funds have been realised from the company’s assets after paying costs incurred.

When all claims have been adjudicated or provided for, the liquidator will declare a dividend. The dividend will be a percentage (pence in the pound) of each creditor’s total admitted claim, based on the cash available for distribution to the creditors and the total of all creditors’ claims. All unsecured creditors are treated equally.

Six months after writing off the debt in your accounts you can claim VAT Bad Debt Relief from HM Customs and
Excise for VAT you have paid. How do I make a claim in the liquidation?

The liquidator will write to all known creditors asking them to submit their claims. You should submit your claim to the liquidator in writing within the specified time limit. You should also send enough supporting evidence of your claim, e.g. copy statements, invoices, correspondence etc. to allow the liquidator to decide whether or not your claim is valid. The liquidator will not necessarily acknowledge receipt of your claim, but will advise you when he  has adjudicated your claim. Any costs incurred in submitting your claim will not be reimbursed.


COMPULSORY LIQUIDATION

When is the liquidation complete?

The liquidation is complete when all the assets have been realised, all creditors' claims have been adjudicated (where there are sufficient funds) and net realisations after expenses of the liquidation have been distributed to the creditors. The liquidator will call a final meeting of creditors and present his final receipts and payments account, together with a report showing how the liquidation has been conducted.

What should I do if I am dissatisfied with the liquidator's handling of the case?

You should contact the liquidator to try to resolve the problem. If you are still not satisfied you may be able to make an application to court. If you believe that the liquidator is guilty of professional misconduct, you should contact his regulatory body.

The unsecured creditors can form a liquidation committee to help the liquidator Liquidation committee members are not paid, but will receive their reasonable travelling expenses as a cost of the liquidation.

As an unsecured creditor, what information am I entitled to?

The Official Receiver will have sent a report to creditors. If you would like information on progress at any time, you should contact the liquidator. Meetings of creditors are normally convened only at the beginning and the end of the liquidation. Creditors may demand a meeting of creditors if they constitute 10% in value of the creditors as a whole.

How can I help the liquidator to achieve the best possible outcome for creditors?

The unsecured creditors can form a liquidation committee to help the liquidator.

You should also tell the liquidator if you believe that the company has assets, income or business interests that the directors have not disclosed, or if you think you may have any information that might be useful to the liquidator.

Can the unsecured creditors form a liquidation committee?

Yes. A liquidation committee may be appointed at a meeting of creditors and must consist of at least three and not more than five creditors. The liquidation committee receives reports from the liquidator and may meet periodically. It assists the liquidator, approves his remuneration and sanctions the exercise of some of his
powers.

Liquidation committee members are not paid, but will receive their reasonable travelling expenses as a cost of the liquidation.

How is the liquidator's fee determined?

The liquidation committee (if there is one) or the creditors agree the liquidator's fee, failing which it will be  determined in accordance with a statutory scale or fixed by the court. Although the fee can be fixed as a percentage of the assets realised or distributed (or both), it is normally based on the following factors: the time properly spent by the liquidator and his staff; the complexity of the case; any exceptional responsibility borne by the liquidator; the effectiveness with which the liquidator carries out his duties; and the value and nature of the company's assets.

Creditors may demand a meeting of creditors if they constitute 10% in value of the creditors as a whole R3 is the UK’s leading trade association for licensed insolvency practitioners and business recovery professionals. R3 does not license or discipline its members; this is the responsibility of the practitioner’s regulatory body. The regulatory bodies are:
The Association of Chartered Certified Accountants
Tel: 020 7396 7000 www.accaglobal.com
The Institute of Chartered Accountants in England and Wales
Tel: 020 7920 8100 www.icaew.co.uk
The Institute of Chartered Accountants in Ireland
Tel: 00 353 1 637 7200 www.icai.ie
The Institute of Chartered Accountants of Scotland
Tel: 0131 347 0100 www.icas.org.uk
The Insolvency Practitioners Association
Tel: 020 7623 5108 www.ipa.uk.com
The Law Society of England and Wales
Tel: 020 7242 1222 www.lawsoc.org.uk
The Law Society of Northern Ireland
Tel: 028 9023 1614 www.lawsoc-ni.org
The Law Society of Scotland
Tel: 0131 226 7411 www.lawscot.org.uk
The Insolvency Service
Tel: 020 7291 6895 www.insolvency.gov.uk

Article Courtesy: http://www.r3.org.uk/media/documents/publications/professional/Creditors_CL.pdf
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