There are two main methods of liquidating a company, namely voluntary liquidation and compulsory liquidation. There are two sub-divisions of voluntary liquidation, breaking down into member’s voluntary liquidation and creditor’s voluntary liquidation.
A member’s voluntary liquidation can be used when the company is solvent and the members of the company decide to wind up the company. This would occur for example if the company had been set up for a specific purpose which has now terminated or completed.
There are a number of stages for the members to complete, and these are as follows;
The directors must call a meeting to decide to put the company into voluntary liquidation. The company must decide either by Ordinary Resolution under Section 251, or Special Resolution under Section 251, to wind up the company. In order to do this the company must be solvent, and the majority of the directors must swear a Declaration of Solvency. It must be made 28 days immediately preceding the date of passing the Resolution to wind up.
The Declaration must be delivered to the Registrar of Companies no later than 15 days after the Resolution to wind up. It must include a statement of the company’s assets and liabilities and also the report of “an independent person”. This report must state that they give their consent to the issue of the Declaration. A copy of the Declaration must be attached to the Notice issued by the company of the General Meeting at which it is intended to propose the Resolution for the voluntary winding up. Failure to comply with any of there requirements will convert the winding up into a creditor’s voluntary winding up.
The next step is to hold an EGM within 28 days of the Declaration of Solvency. Members must pass a Special Resolution winding up the company and post notice of this in Iris Oifigiuil. The winding up commences from the time of the passing of the Special Resolution.
The newly appointed Liquidator must gather the assets of the company together and distribute according to the Rules in Insolvency. He ends the liquidation by calling a General Meeting of the members and creditors, which must be advertised in two daily newspapers 28 days before it is held. The Liquidator must give an account of the winding up, and will give a copy of this to the Registrar of Companies within one week of the meeting. The company will be dissolved three months from the date the Liquidator registered the accounts with the Registrar.
Creditors Voluntary Liquidation.
The creditors voluntary liquidation is the process most often used by the directors when the company is insolvent. The major difference is that the creditor’s voluntary liquidation does not require a Declaration of Solvency, but the member’s voluntary liquidation does.
There must be two meetings convened, a members meeting and a creditors meeting. The directors of the company convene the General Meeting of the members. The purpose of the meeting is to pass an Ordinary Resolution stating that the company can no longer continue in business due to its debts. The members will appoint a Liquidator under Section 267 to wind up the affairs and distribute the assets of the company. The company must also hold a creditors meeting, on the same day as the members general meeting, or on the day after. The creditors must receive at least ten days notice by post. They are entitled to appoint a chairman and nominate somebody else as their proxy. The company must also advertise the creditors meeting at least ten days in advance in two newspapers. There must be at least three creditors there (unless the company has fewer than three creditors). A creditor can only vote if he has an ascertained debt. Secured creditors can only vote on the balance outstanding on their security.
Statement of Affairs
The directors must prepare a full statement of affairs for both meetings. At the creditors meeting the statement will be considered, the appointment of a Liquidator will take place and a committee of inspection will be appointed. The Resolution must be passed by a majority in value only of the creditors voting personally or by proxy in order to appoint the Liquidator. The Liquidator appointed by the creditors will be appointed if different from the one chosen by the company members. All other Resolutions must be passed in a majority in number and value vote. The creditors can also appoint a committee of inspectors which can contain up to five of the creditors nominees and three nominees of the company.
A creditor may present a Petition to wind up the company under Section 215 CA 1963. The ground most frequently relied on is that the company is unable to pay its debts. A 21 day letter should be sent to the company before bringing the Petition. The Petition must be drafted in accordance with the Rules of the Superior Courts. It will then be issued from the Court Office and advertised in the newspapers, normally in Iris Oifigiuil and two national papers. The advertisement must appear at least 7 days prior to the date of the hearing of the Petition. The Petition is then served on the company as far in advance of the hearing as possible.
A Provisional Liquidator may be appointed if there is a fear that the assets may be dissipated before the Petition is heard.
At the hearing of the Petition, the Court can either dismiss or grant the Petition.
The area of insolvency is a complex area and we will be happy to assist with any queries you may have.