Checking The Liquidator.
Checking the liquidator before an appointment is essential. Trust is vital. Therefore, ENSURE you raise an overdrawn directors loan account if one exists. How will it be dealt with? Do not accept “Don’t Worry”.
The Liquidator, however, once appointed, has distinct powers, as detailed in “Schedule 4, Insolvency Act 1986“.
Once appointed, the Creditors can set up a Liquidation Committee. Therefore, allowing the Creditors to check and bring to the attention of the Liquidator matters that may require investigation or questions over their conduct, during the appointment.
What is a Liquidation Committee?
Once the first meeting of creditors is in place, creditors attending and voting, set up a “Liquidation Committee“. At least three members up to five are therefore required to sit on the committee. Once agreed, the committee approves the following for the Liquidator to do: –
- pay a Creditor in full;
- to start or agree on a compromise or arrangement with creditors;
- to commence and agree on a settlement of monies then due to the company;
- accept security for clearance of a debt.
The committee then reviews the appointed Liquidator’s insolvency bond and then agrees the liquidators’ fees. They also help on matters relating to the liquidation as a whole.
Once established, the committee will receive clear reports on any concerns outlined in the Liquidation, from the Liquidator. Then, any changes, therefore, need to be brought to the committees’ attention, and then, if required, sanctioned by them for the Liquidator to progress. They may be: –
- Selling high-value critical assets;
- Payments by dividends to unsecured creditors;
- Potential legal action, which if lost, could incur further costs to the liquidation;
- Writing of assets with no perceived value.
Checking The Liquidator – Fees:
The “Liquidation committee” therefore agrees on the Fees the Liquidators receive at the first meeting of Creditors?
Liquidator Fees must be fixed either: –
- The time recorded by the Liquidator and staff, or a set percentage of what worked.
Once fees are agreed, the Liquidator can therefore bill up to the agreed amount. However, when the time has taken is excessive, the liquidator may return to the committee for more.
Then, after the first year of the Liquidation, all creditors receive an annual report, including accounts for receipts and payments whilst in Liquidation.
For further help, click on the team at HBG Advisory.
Advice on Directors Redundancy, then view REDUNDANCY.[