Properly preparing a Company for liquidation can help reduce the stress for its Directors on a number of levels. This article explains how to prepare a Company for liquidation.
There are 3 stages to placing a company into Liquidation:
- Pre-liquidation planning.
- The Creditors meeting.
- Post Liquidation activities.
If the Revenue Sherriff or another Sheriff is threatening to seize assets then the proposed liquidator should contact the Sheriff. For further guidance on how to deal with the sheriff please click on the following link: Dealing with the Sheriff.
The first step is to agree on the appointment of a Liquidator. We can provide a fee quotation for any liquidation.
The Liquidator will normally prepare the documents for the formal meetings of the directors, shareholders and the Creditors.
A meeting of the shareholders needs to be held to put the Company into liquidation and to appoint the Liquidator. The shareholders meeting is normally held just before the Creditors meeting. 51% of the shareholders must vote in favour of the resolution placing the company into liquidation.
Notices of the meeting of creditors must be sent to the creditors at least 10 days before the date of the meeting.
Notice of the creditors meeting must also be advertised in two daily newspapers circulating in the area of the registered office or principal place of business of the Company. The advertisement must be placed at least 10 days before the date of the meeting.
The Directors should ensure they control the Registered Office of the Company (i.e. have access to the post) as the proxy forms may be sent back by Creditors to that address. If the Directors do not control the Registered Office, it should be changed to an address the Directors control.
Between the date of the decision to liquidate and the appointment of the Liquidator, the Directors should undertake the following steps.
The Company must decide if it will continue trading up until the liquidation date, or cease trading immediately. In certain cases, the Company may decide to finish certain contracts in order to maximise realisations.
A decision to continue trading will impact on what employees should be retained until the liquidation date.
The position of the employees needs to be carefully considered. If there is a Trade Union involved then it should be consulted. With the Covid Emergency we are now assisting Companies to hold Zoom calls to advise employees on their employee entitlements. For further information on employee entitlements please click on the following link: employee entitlements.
It is vital that the liquidator be provided with the correct salary information and holiday entitlements so that their claims may be processed correctly in the liquidation.
The employees redundancy entitlements may be calculated using the online redundancy calculator at the Department of Employment Affairs and Social Protection.
Any staff mobile phones should be cancelled on the day they leave to avoid recurring rental and phone charges. Keys to the Company’s premises should also be collected and alarm codes changed. Employees should be allowed to collect personal possessions from their desks and lockers before the company is placed into liquidation.
If employees are members of a Company Pension Plan they should be advised what will happen their pension plan.
The assets of the Company e.g. fixed assets such as plant & equipment, stocks and laptops should be physically secured. Laptops should not be sold to employees as the Liquidator may need access to them.
The Directors should organise to deposit any monies collected in a separate bank account if the existing bank account is overdrawn.
The Company may be faced with Creditors calling to enforce Retention of Title (ROT) clauses over stocks. As ROT can be a complex legal matter, the Directors should take legal advice before agreeing to any ROT claims or alternatively leave it to the Liquidator. For further information on Retention of Title please click on the following link: Retention of Title
Perishable stocks should probably be returned to suppliers. If suppliers are not prepared to accept the stock back then it should be safely disposed of. Perishable food stocks that cannot be quickly sold may be donated to the charity Food for Ireland for distribution to people in need. Click here for their website: Foodcloud .
Any fridges, display cabinets for food and cold stores should be cleaned out and turned off to save electricity charges.
The Directors should collect as much of the collectible debt as possible. All previous deliveries to customers should be invoiced if not invoiced already.
Any payments which are received should be allocated against specific invoices. If the Company has a Credit Controller/Credit Manager it might wise to retain them until the liquidation date.
No monies should be paid from the Company’s bank accounts other than payments required to safeguard the Company’s assets.
VAT and PAYE returns should be brought up to date.
Fees and expenses incurred by accountants advising the Company on the procedures to be followed in relation to placing the company into liquidation can be paid by the Company or by the appointed liquidator.
The Director’s should prepare a statement which gives an outline of the history of the company and reasons for its failure. This should be as detailed as possible.
The Statement of Affairs should show the Preferential creditors. For further information on Preferential Creditors please click on the following link: Preferential Creditors.
The Statement of Affairs will show the book values of the company’s assets with the Directors’ estimated realisable values in a liquidation. It is important to include all creditors such as the Revenue Commissioners and utility suppliers.
By properly preparing for the liquidation, the Directors will go a long way to organising an orderly Liquidation which will help them to meet their legal obligations and remove some of the stress involved. It will also enable the liquidator to submit a more positive report to ODCE.
We are experts at advising directors on to properly prepare a Company for liquidation and how to organise a creditors meeting. We have had practical experience of liquidating over 1,000 companies and there is not an issue that we do not have a solution for.
For further information as to how to prepare for creditors meeting, and to review what questions are likely to be asked at the creditors meeting please click on the following link: creditors meeting.
Given Covid, all creditors meetings are presently being held virtually. For further information on virtual meetings please click on the following link: virtually.
For further information on liquidations please click on the following link: Liquidations
For information on Turnaround, Schemes of Arrangement, Receivership, Examinership or Members Voluntary Liquidation please click on the following links:
For further information please contact Jim Stafford, Tom Murray or Andrew Hendrick on 01 661 4066 or jim.stafford@frielstafford.ie or tom.murray@frielstafford.ie