FAQs
These are some of the most common questions about CVLs and the process surrounding them. These plain English FAQs are just the main points so if you need further information or want to talk about your situation, please get in touch and we will be happy to see how we can help.
What will happen to my employees?
It is normal for the employees to be made redundant at the beginning of the process. We will work with you and your employees to make sure they have the relevant information they need to claim everything they are entitled to. Further details can be found here
Can I claim redundancy as well as my staff?
Yes, if you meet the eligibility criteria you should be able to claim in the same way as any other employee can. Further details can be found here.
What will happen to my role as Director?
You remain as a director of the Company throughout. However, your powers are removed once the Liquidator is appointed. We will discuss what this means with you so you know what you can and cannot do.
How much of the Director’s time will be required?
In the first month we will require a high level of involvement because you will need to provide any information required and assist the Liquidator and their agents. After the Liquidator is appointed, your involvement will reduce. In fact, it could well be just the odd phone call or email to deal with any remaining questions or queries.
What will happen to the Company’s Assets?
The assets will be valued by an independent agent who is normally appointed by the Liquidator. Their job is to assist and advise on the most appropriate strategy in order to realise the assets for the best possible value.
Can I purchase the Company’s Assets?
Yes, you can make an offer to the independent agents.
Can I reuse the Company’s name?
Yes, this is possible, but you must follow complex legal rules and we would recommend that you instruct a solicitor to help.
What happens to the Company Bank Account and Outstanding Sales Invoices?
The bank will be notified of the Liquidation when the shareholders’ meeting and decision process are convened. This will cause the company bank account to be frozen. Any credit balance will be paid to the Liquidator. Any debit balance will make the bank a creditor of the Company. In respect of outstanding sales invoices, these are monies due to the Company. As monies due the Liquidator will pursue payment of any outstanding invoices.
What happens if Creditors attend the virtual meeting?
Creditors can ask questions and raise concerns about the Company and its failure. We recommend that you answer any question about the Company in a professional, calm and factual manner. In practice, the proposed Liquidator is there to ensure the meeting runs smoothly. We recommend and expect that you act in a professional and sensible way and creditors are expected to behave in the same way.
You mentioned that the Liquidator has a duty to review the director’s conduct. What does that mean?
It is the Liquidator’s role to review the conduct of the Directors. We will review the last set of accounts and check if the physical asset position has changed since they were created. Amongst other things we will also review the Company’s bank statements to ensure the transactions are appropriate. Common issues are:
· Paying some creditors in preference to others, especially associated creditors
· Disposing of assets for less than market value
· Dividends have been taken where no reserves were available
If you are in a position where you think any of the above may have taken place then it is better to tell us in advance so we all know where we stand.
What happens with any personal guarantees in Liquidation?
Clearly, when the Liquidator is appointed, this will crystalise any personal guarantees. The contract you signed when you agreed to be a personal guarantor will still be active meaning that you will now be liable for the debt. You can find further details here.
How much will the Liquidation cost?
The cost of the Liquidation is normally met from the assets of the business. The Insolvency Practitioner must provide a ‘fee proposal’ to the creditors. This is because the cost of liquidation will affect their payment. They then vote on the proposal. We do understand that directors like to know what will be proposed, so this will be discussed with you beforehand.
What will happen if the Company does not have any assets to cover the costs?
These can be the most difficult cases to deal with.
Sometimes directors will still want to go through the Liquidation process and cover the Liquidator’s costs personally. An example where this may happen is to ensure that the employees and directors can claim redundancy from the RPO, which can only happen in a formal process. You can find further details of the RPO process here.
Clearly, this may not always be possible and so it may be that we recommend looking at the Compulsory Liquidation route. You can find further details of the Compulsory Liquidation route here or Company Dissolution route here
