Liquidations

1 )What is a Creditors’ Voluntary Liquidation (CVL)

A Creditors’ Voluntary Liquidation is the liquidation of a company that cannot pay its debts as they fall due. The process is initiated by the company itself when the directors realise the company is insolvent, they are obliged by the company’s Act to put the company into liquidation. It is imperative the company does not trade while insolvent and ceases trading in a timely manner to protect all creditors including employees and shareholders.

What are the director’s duties for an insolvent company?

The directors must immediately act to protect the assets of the company, prepare to cease trading and organise the orderly wind-down of the company. While it is the directors duty to organise the creditors meeting, in practice, we can organise in the notification of a creditors meeting on behalf of the Directors, the advertisements in the newspapers, the booking of the meeting rooms and, if required, the provision of a specialist insolvency solicitor or chairperson of the meeting. We will also provide practical guidance on all statutory requirements required for the Creditors Meeting.

What do directors need to do for the creditors meeting?

The Directors are responsible for the presentation at the creditors meeting of i ) The Estimated Statement of Affairs and ii )the Chairman’s Statement.

The Estimated Statement of Affairs is a summary of the assets and the liabilities of the company demonstrating the estimated realisable value. The Chairman’s statement is an executive summary of the company’s history, detailing the company background and outlining the reasons for the company becoming insolvent and the rationale for the liquidation.

What is role of the liquidator after his/her appointment at the Creditors meeting?

Realise any assets and debtors of the company.
The Liquidator will deal with all company aspects relating to the banks, the Revenue Commissioners, Creditors, employee claims.
Process all employee claims. In the event of the company not having the funds to meet the Redundancy or Insolvency Claims (Arrears of wages, Holiday pay & Minimum Notice), we will prepare all employee forms and liaise with the Department of Social Welfare.
Distribute any dividend to creditors in line with their preferential status.
The Liquidator reports to the Director of Corporate Enforcement under S682 CA 2014 , within six months of their appointment.

Creditors Meetings – Standard Type Questions

A. Estimated Statement of Affairs

What are the Fixed Assets comprised of, company cars, plant & machinery, etc.?

Are the Assets financed or mortgaged?
Have any assets subject to finance been returned to the financier?
Are the remaining assets securely located?

Current Assets

What levels of stocks are subject to Retention of Title claims

Debtors

Are they financed in any way?

What levels of debtors are subject to bad debts, particularly in light of the company’s liquidation.

Bank

Did the bank have an overdraft facility?
What was the bank overdraft 6 months ago? – 12 months ago?.
Do the directors have any personal guarantees?

Current Liabilities

Trade creditors: have any creditors repossessed stocks from the company?
Do the directors conduct business with any of the trade creditors through another company or trading entity?
Revenue Commissioners – is the debt to the Revenue separately identified as between unsecured and preferential.
How often did the company make returns to the revenue for PAYE, PRSI, VAT and Corporation Tax?
Did the company have any special arrangements made with the Revenue Commissioners in respect of the payment of old Revenue debt?

B. Overall Deficit

What was the company’s average margin (gross / net of VAT)?

What was the company’s turnover? (Take the profit from the last audited accounts and estimate forward based on the average margin and turnover to calculate the expected financial position of the company as at the date of liquidation.)
Question the directors if there is any significant difference between the expected financial position and the actual deficit.

C. Financial Statements

When were the last set of audited accounts prepared and when were these filed in the Companies Registration Office?

Did the company prepare Management Accounts on a regular basis?
If Management Accounts were not prepared, what systems of control were in place to manage the financial stability of the company?
If Management Accounts were in fact prepared, were they prepared internally or prepared by the company’s auditor?
What was the last audit opinion and did the auditor make any reference to a going concern?

D. Insolvency

When did the directors realise that the company was actually insolvent?

What action did the directors take once they realised the company was insolvent?
What was the financial position of the company at that date?
Has the financial position deteriorated since the date the directors realised the company was insolvent?
Did the directors seek any professional advice on the matter?
Were these professional advisors paid, or are they creditors of the company?

E. Other Matters

1. Directors & Chairman

Is the Chairman a director of any other company?
Does the Chairman or any other director/employee have a company car?
What was the directors salary?
When was the directors salary last paid?
What is the directors loan in respect of?
Do the directors have personal guarantees in respect of any of the company’s debts (including leases/trade creditors)?
Is the Liquidator in attendance?
How many employees did the company have?
When were the employees last paid?
Have the employees been issued with P45s?
Who prepared the Directors Estimated Statement of Affairs?
Has the Liquidator signed the letter of consent under the Companies Act 2014?

Liquidations under New Companies Act 2014

There are a number of changes to the procedures regarding the submission of liquidation documents. There is now also a qualification necessary to become either a liquidator or examiner.

Three types of Liquidation:

Liquidation is still by Members voluntary winding up, Creditors voluntary winding up or by Court winding up. Option to voluntarily strike-off company now formalised. The court winding up procedure is being changed and court appointed liquidators will follow Creditors voluntary winding up procedures.

Main changes:

Liquidators are now required to be qualified
Cannot have been officer or employee within 2 years prior to liquidation (previously 1 year under Companies Acts 1963-2013)
Period for liquidation documents to be filed have now changed or form requirements have been altered
Liquidations by Court may be directed to follow creditors winding up procedure
Statutory document submitted to CRO to indicate that liquidator has resigned.

The new Companies Act does require qualifications for appointment as either liquidator and examiner and are supervised by : The Irish Auditing

Period for liquidation documents to be filed have now changed or form requirements have been altered:

Form E4, liquidator’s affidavit and section 682 accounts – is not required if the winding up continues for a period of less than 12 months. However, if the winding up continues for longer, Form E4 must be filed for the initial period of 12 months and each subsequent six-month period, and any lesser period, up to the date of the close of winding up (date of final meeting on Form E6). Form E4 has a filing fee of €15. The form E4 must be submitted within 14 days of the anniversary to the CRO.

This change affects member’s voluntary winding up, creditor’s voluntary winding up and court winding up.

for more information or a consultation contact : cormac@fitzcorpinsol.ie or t: 01-2135910

2 ) Members Voluntary Liquidation ( MVL )

Process Overview:

For members to voluntarily wind up their company as a Members Voluntary Winding Up, a declaration of solvency and special resolution must be submitted.

A majority of the directors must make a declaration that, having made a full enquiry into the affairs of the company, they are of the opinion that the company will be able to pay its debts in full within a period not exceeding 12 months from the commencement of the winding up.

Within 30 days of the making of the declaration of solvency, the members must pass a special resolution to wind up and appoint a liquidator. The resolution to wind up must be advertised in within 14 days after the passing of the resolution.

There are two methods for drafting a Declaration of Solvency, one under the Summary Approval Procedure (s.207/579) and the other where the constitution of the company allows for it (s.580).

Statutory requirements – Forms to be submitted Following the Summary Approval Procedure, the Declaration of Solvency (Form E1-SAP) must be submitted, a special resolution to wind up and appoint a liquidator (Form G1), and a Notice of appointment of liquidator (Form E2), must also be filed with the CRO. Forms E1-SAP, E2 and G1 have filing fees of €15 each. The declaration of solvency must be received within 21 days of the resolution being passed Following the section 580 Procedure, the Declaration of Solvency (Form E1-41) must be submitted, an ordinary resolution to wind up and appoint a liquidator (Form G2), and a Notice of appointment of liquidator (Form E2), must also be filed with the CRO.

Forms E1-41, E2 and G2 have filing fees of €15 each. The declaration of solvency must be received within 14 days of the resolution being passed.

Form E3, liquidator’s account of his/her dealings – is not required if the winding up continues for a period of less than 12 months. However, if the winding up continues for a longer period, a Form E3 must be filed for the first 12 months, and for every period, of exactly 12 months during the winding up. Any lesser period covering up to the date of the final meeting doesn’t require the submission of an additional Form E3. Form E3 has a filing fee of €15.

Form E4, liquidator’s statement of account under section 681 – is not required if the winding up continues for a period of less than 12 months. However, if the winding up continues for longer, Form E4 must be filed for the initial period of 12 months, and each subsequent six-month period, and any lesser period, up to the date of the close of winding up (date of final meeting on Form E6). Form E4 has a filing fee of €15. Form E6, Return of the final winding up meeting must be accompanied by a full statement of account spanning the duration of the liquidation – Form E5. Forms E6 and E5 have filing fees of €15 each.

Dissolution 3 Months after the date of registration of the final documents – forms E5 and E6, the company is deemed to be dissolved.

Corporation Tax Clearance from Revenue is also needed in advance to ensure the dissolution can be concluded.

3 ) Court Liquidation or Winding Up:

A company can be wound up by the Court at the instigation principally of any member or creditor of the company or the Minister in appropriate circumstances. The Court appoints the liquidator and he/she becomes an officer of the Court and works under its supervision. (The Court, used in relation to a company, means the High Court). The court may direct that the liquidation continue using the rules relating to a Creditors Voluntary Winding Up.

Statutory requirements – Filing Overview :

A petition must be presented to the Court and when a winding up order is made – a certified copy must be delivered to the CRO. A court order has a filing fee . (See Section 7 regarding grounds for winding up by the Court). The liquidator, when appointed, must publish a notice of his/her appointment in Iris Oifigiúil (section 586 following creditors winding up procedures). A copy of any other subsequent order annulling or staying the winding up or dissolving the company must also be delivered for registration.

Forms to be delivered in a winding up by the Court:

Forms to be Filed	Description	Time to be delivered	Period to be covered
Court Order	Court Order to wind up and appoint the liquidator	Forthwith
E3	Liquidators account of his/her acts and dealings	Within 7 days of presentation at meeting	12 month periods. Any lesser period to end of liquidation need not be covered.
E4	Liquidators affidavit and accounts	Within14 days of completion of period	First 12 months and thereafter every 6 months and also any lesser period to end date of liquidation
E5	Statement of account	Within 7 days of meeting	Only submitted if following Creditors procedure
E7	Return of Final Meeting	Within 7 days of meeting	Only submitted if following Creditors procedure
Court Order	Court Order to cease liquidation and dissolve company	Within 21 days	Submitted where court directs. (Such companies would not be following creditors procedure).

Resignation/Removal/Appointment:

A liquidator when appointed to a company files form E2 as notice of that appointment.

Under the new Act, where a liquidator then resigns from the company, a form E2a must be submitted. If the liquidator was instead removed from the company, form E2b can be submitted. Thereafter, if/when a new liquidator is appointed they would file form E2c to acknowledge their appointment to the company.

Strike-off under the new Companies Act 2014

The New Act introduces a formal Voluntary Strike-off procedure. Voluntary strike-off is now set in legislation instead of an administrative procedure and there are new prescribed forms under the Act. No voluntary strike-off notices are required to be issued under the new legislation.

Introduction of formal Voluntary Strike-off procedure:

Strike-off is not always involuntary. A company that ceases to trade, or has never traded, and has no outstanding creditors can request that the Registrar strike off the company. Under the Companies Act 2014, this procedure has been placed on a formal setting.

Conditions for Voluntary Strike-off:

Section 731 of the Companies Act 2014 sets out the conditions for the voluntary strike-off application. A company may apply to the Registrar to be struck off the register if the following conditions are satisfied:

(a) the circumstances relating to the company are such as to give the Registrar reasonable cause to believe that it has never carried on business or has ceased to carry on business;
(b) the company has, within 3 months before the date of the application, by special resolution – (i) resolved to apply to the Registrar to be struck off the register on the ground that it has never carried on business or has ceased to carry on business; and (ii) resolved that pending the determination (or, should it sooner occur, the cancellation, at its request, of this process) of its application to be struck off, the company will not carry on any business or incur any liabilities;
(c) the company has delivered to the Registrar all annual returns required by section 343 that are outstanding in respect of the company as at the date of the application;
(d) the company has delivered to the Registrar a certificate in the Form H15 (filing fee €15) signed by each director certifying that as at the date of the application – (i) the amount of any assets of the company does not exceed €150; (ii) the amount of any liabilities of the company (including contingent and prospective liabilities) does not exceed €150; and (iii) the company is not a party to ongoing or pending litigation;
(e) the Registrar has received from the Revenue Commissioners written confirmation dated not more than 3 months before the date on which the Registrar receives the application that the Revenue Commissioners do not object to the company being struck off the register; and
(f) the company has caused an advertisement, in the prescribed format, of its intention to apply to be struck off the register to be published within 30 days before the date of the application in at least 1 daily newspaper circulating in the State.

Where an application under this section by a company to be struck off the register is made within one year after the date on which the company has changed its name or its registered office (or both), then, as the case may be –

(a) the former name of the company, as well as the existing name of the company; or
(b) the former address, as well as the current address, of the company’s registered office; or
(c) both its former name and the former address of its registered office, as well as the existing name of the company and the current address of its registered office, shall be stated in the advertisement.

CRO Gazette – Public notice in case of voluntary strike-off:

As soon as is practicable after the receipt of an application by a company to be struck off, that satisfies the conditions, the Registrar shall, by publishing a notice in the CRO Gazette, give public notice of the Registrar’s intention to strike the company off the register. The CRO Gazette is published every week on the CRO’s website. The company will be dissolved within 90 days of the date of this notice unless an objection is received.

An objection to the strike-off, using Form H16 (member of public) or Form H17 (the company itself), must be received within 90 days of the notice in the CRO Gazette.

Objection to Voluntary Strike-off:

Any person may deliver to the Registrar an objection to the striking off of the company in the form H16. The objection must be confined to the ground that one or more of the conditions set out at (a) to (f) above that have not been satisfied. The period ends 90 days after the date of publication of the notice of strike-off. The Registrar will strike off the company if no valid objection is made and the company will be dissolved.

Company requests that application be cancelled:

The company may request of the Registrar, by delivering to the Registrar a notice in that behalf in the prescribed form H17, the cancellation of the process of its being struck off the register. The request must be submitted within the 90 days of the date of the publication of the notice of strike-off.

Involuntary Strike-off:

There are several grounds for the strike-off of a company from the register involuntarily.

The grounds are:

The company has failed to make an annual return as required by section 343;
The Revenue Commissioners have given a notice under section 882(3) of the Taxes Consolidation Act 1997 to the Registrar of the company’s failure to deliver the statement required under section 882 of that Act;
The Registrar has reasonable cause to believe that section 137(1) is not being complied with in relation to the company – (the requirement to have an EEA resident director);
The company is being wound up and the Registrar has reasonable cause to believe that no liquidator is acting;
The company is being wound up and the Registrar has reasonable cause to believe that the affairs of the company are fully wound up and that the returns required to be made by the liquidator have not been made for a period of 6 consecutive months;
There are no persons recorded in the office of the Registrar as being current directors of the company.
Companies should note that a company may be struck off the register if it has failed to file an annual return for one year.

Consequences of Strike-off:

The consequences are very serious for a company that is still trading:

The assets of the company become the property of the State on dissolution of the company;
The company ceases to exist as a legal entity with effect from the date of strike-off and dissolution;
The protection of limited liability is lost with effect from that date, and if the business formerly carried on through the company is continued, the owners are trading in their personal capacity;
Banks should be unwilling to lend money to an entity which has, effectively, ceased to exist;
There can also be unpleasant consequences for directors of such companies in that a disqualification order may be made against them by the High Court on the application of the Director of Corporate Enforcement.

Procedure:

In accordance with section 728 of the Companies Act 2014, the registrar may give notice of the Registrar’s intention to strike a company off the register on one of the grounds set out above.
It is the policy of the CRO to issue non-statutory reminder letters to non-compliant companies. These notices are issued by email where an address has been supplied or where the previous annual return was submitted electronically. The strike-off process commences with the issue of the statutory strike-off notice.
The Registrar will send the notice by registered post – to the company at its registered office or if an individual is recorded in the office of the Registrar as the liquidator of the company, to the liquidator.
The Registrar will also send a copy of the foregoing notice by prepaid ordinary post to such persons, if any, as are recorded in the office of the Registrar as being current directors of the company but non-compliance with this subsection does not affect the validity of the process. The address to which a notice under this subsection is sent shall be the usual residential address, as recorded in the office of the Registrar, of the addressee concerned.

Where a company does not have a registered office notified to the CRO, instead of giving a notice under section 727(1), the Registrar will publish a notice in the CRO Gazette containing the information required by section 728 where –

(a) the company has not, for 20 or more consecutive years, made an annual return as required by section 343; and (b) no notice of the situation of the registered office of the company has been given to the Registrar as required by section 50.

Contents of Registrar’s notice to company:

The Registrar’s notice under section 727(1) will –

(a) state that the issue of the notice is the first step in a process that may lead to the company being struck off the register;
(b) state the ground or grounds for striking off being invoked by the Registrar;
(c) state that the company will be dissolved if it is struck off the register;
(d) state that each director of the company at the date that the notice is sent is liable for disqualification if the company is struck off the register (this does not apply to companies in liquidation);
(e) specify the remedial step;
(f) specify the date on or before which the remedial step must be taken (28 days); and
(g) state that failure to take the remedial step on or before the date so specified may result in the Registrar giving public notice of an intention to strike the company off the register.
The date to be specified for the purposes of subsection (1)(f) shall be a date falling not less than 28 days after the date of the notice.

Remedial Steps that can be taken to remove a company from the strike-off process:

The remedial step to have a company removed from the strike-off process is whichever of the following applies:

the delivery to the Registrar of all annual returns as required by section 343 that the company has failed to make;
the delivery to the Revenue Commissioners of the statement that the company is required to deliver under section 882(3) of the Taxes Consolidation Act 1997;
the provision to the Registrar of evidence that section 137(1) is being complied with in relation to the company;
the provision to the Registrar of the details of the liquidator and of up to date periodic statements having been furnished under section 681;
the notification to the Registrar under section 149(8) of the appointment of a director of the company.

The CRO Gazette – Public notice of intention to strike company off register:

If the Registrar has given a notice and the remedial step has not been taken on or before the date specified in that notice, the Registrar may, by publishing a notice in the CRO Gazette that gives public notice of the Registrar’s intention to strike the company off the register. The CRO Gazette is published on the CRO website each week – www.cro.ie. The date shall be a date falling not less than 28 days after the date of publication of the notice.