9. How is a liquidator engaged/appointed in an MVL?

Ordinarily, an introduction to an Insolvency Practitioner (IP) is made by an accountant when it is identified that a company is surplus to requirements with over £25,000 distributable assets.  The IP will then contact the director to discuss the process, ensure that the test of solvency can be met, and ensure that the director understands the process.

Once a liquidator is appointed, the assets of the company vest in them and there is no mechanism for the liquidation to be stopped without a court order. Upon the appointment of a liquidator, the powers of the director(s) cease (although their duties do not).  It is therefore not a decision to be taken lightly, and allcircumstances must be considered.

Once the initial discussion is concluded, the IP’s firm will be engaged by the company to assist the director(s) with taking the necessary steps to commence the liquidation process. At this time, various pre-appointment identity and other standard checks are completed, similar to those completed when engaging a solicitor.

Upon completion of those checks, the engagement will proceed to the appointment of a liquidator. In this regard, the IP’s firm will assist the directors with taking the following steps:

• Holding a board meeting where the directors formally resolve to start the liquidation process;
• Preparing a declaration of solvency to be sworn in front of a solicitor – this is the director’s confirmation that the company is solvent, i.e. that it can pay its debts within 12 months;
• Inviting the shareholders to pass a resolution appointing a liquidator.

10. What’s next once the IP is appointed?

Once appointed, a liquidator will take the following to comply with statutory filing and advertising requirements:

• Filing appointment paperwork and the declaration of solvency with the Registrar of Companies;
• Placing an advert in the London Gazette (on not less than 21 days’ notice) for any creditors to prove their claims in the liquidation;
• Informing HMRC and any creditors or regulatory bodies of the liquidation.

Click here for the complete part 2 of the guide in ContractorUK.