A Company facing an inevitable insolvency can present a difficult and stressful time for its Directors on a number of levels.

Despite the understandable turmoil that they may be experiencing it is important that the Directors of the Company take professional advice to ensure that they meet their legal obligations.

In the first instance, the Company should go to their existing accountants who are familiar not only with the Company but can advise it on organising an orderly winding up.

In order to organise an orderly winding up the following steps should be undertaken.

The first step is to agree on the appointment of a Liquidator.

The Liquidator will normally prepare the documentation for the formal meetings of the shareholders and the Creditors.

The formal meeting of the shareholders needs to be held to put the Company into liquidation and to appoint the Liquidator. From a practical purpose this is normally held just before the Creditors meeting.

Notices of the meeting of creditors must be sent by post to the creditors at least 10 days before the date of the meeting with proxy forms.

Notice of the creditors meeting must also be advertised in two daily newspapers circulating in the vicinity of the registered office or principal place of business of the Company 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 will be sent back by Creditors intending to attend the meeting. 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 and the appointment of the Liquidator, the Directors should undertake the following steps.

The employees should be made redundant.

Any staff mobile phones should be cancelled on the day they leave to avoid recurring rental charges. Keys to the Company’s premises should also be collected and alarm codes changed.

The assets of the Company e.g. fixed assets such as plant & equipment and stocks should be physically secured.

The Directors should organise to deposit any monies collected in a separate bank account if the existing bank account is overdrawn.

The Directors 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.

The Directors should collect as much of the collectible debt as possible.

Any payments which are received should be allocated against specific invoices

No monies should be paid from the Company’s bank accounts other than payments required to safeguard the Company’s assets.

Fees and out of pocket expenses incurred by accountants advising the Company on the appropriate procedures to be followed and administrative matters to be dealt with in relation to the creditors meetings can be paid by the Company’s Directors in their personal capacity. Otherwise, it will be necessary for the liquidator on appointment to apply to the Court, the Committee of Inspection, or the meeting of creditors, as appropriate, seeking approval for payment of such fees and expenses as costs properly incurred by the 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 comprehensive as possible and deal with any potentially contentious issues.

The Directors are obliged to present a full statement of the position of the Company’s affairs together with a list of creditors of the Company and the estimated amount of their claims to the meeting of the creditors.

This statement will show the book values of the company’s assets with the Directors estimated realisable values in a winding up. It is important to include all creditors such as the Revenue Commissioners and utility suppliers.

By observing the above steps, the Directors will go a long way in organising an orderly Liquidation which will help them to meet their legal obligations and alleviate some of the stress involved.

 

For further information please contact Jim Stafford or Tom Murray on 01 661 4066 or jim.stafford@frielstafford.ie or tom.murray@frielstafford.ie