CREDITORS VOLUTARY LIQUIDATIONS
A Creditors’ Voluntary Liquidation is the most common liquidation process in Ireland. It is a process used to deal with a Company that is insolvent.
Creditors’ Voluntary Liquidation is usually initiated by the Company’s directors. The first step is for the board of directors to have a board meeting to agree that the Company should be placed into liquidation.
Notice of Creditors Meeting
The 2014 Companies Act states that ten days’ notice of the meeting must be given to all creditors. The notice sent to creditors should be accompanied by a general proxy and a special proxy in the prescribed format, together with details of the proposed liquidator and the names and addresses of the creditors.
The 2014 Companies Act also provides that the meeting must be advertised at least ten days before the meeting in at least two daily newspapers “circulating in the district where the registered office or principal place of business of the Company is situate”.
A typical creditors’ meeting has three main items of business. These are:
- To present a Statement of Affairs to the creditors.
- To give the creditors an opportunity to appoint their choice of liquidator.
- To give creditors the opportunity to appoint a Committee of Inspection.
Members Voluntary Liquidation
When a company has completed its purpose, or the directors of a company decide to retire, a Tax efficient way of releasing the surplus which may have accumulated is to place the company into a Members Voluntary Liquidation.
The Tax advantage for shareholders is that a capital gain received on their shares may only be taxed at 10%, whereas if the surplus monies were taken out as salary, then these monies may be taxed at a much higher marginal tax rate.
To place a company into a Members Voluntary Liquidation, the directors must follow a Summary Approval Procedure as set out in the 2014 Companies Act. The directors must complete a Declaration. The Declaration summarizes the company’s assets and liabilities and the directors state that the company will be able to pay all of its debts in full within 12 months of the commencement of the Liquidation.