Conduct of the Liquidation | Creditors

Members' meeting

Once they have taken the decision to liquidate, the directors should call a meeting of members, usually at either 14 or 28 days notice. The business at the members' meeting is to pass the resolution placing the company into liquidation and to nominate a liquidator. The commencement of the liquidation is the time the members' resolution is passed by the requisite 75% majority. The creditors' meeting is usually held on the same day as the members' meeting, although it can be held up to 14 days later.

Creditors' meeting

The directors are obliged by section 98 of the Insolvency Act 1986 to call a creditors' meeting (often called the S98 meeting for obvious reasons). The business of the meeting is:

• To receive a statement of affairs
  
• and appoint a liquidator

Creditors have the choice of confirming the members' choice of liquidator or to put forward their own choice. Depending on the number of votes in favour of each a liquidator is then elected.

Organising and convening the creditors' meeting is the responsibility of the directors, but the legal and technical requirements are such that they are well advised to use the services of an insolvency practitioner to ensure that these are met. The requirements are:

• to give every known creditor at least seven days' notice by post;
  
  
• the notice of the meeting must give the name and address of a person qualified to act as an insolvency practitioner who will furnish creditors free of charge with such information concerning the company's affairs as they may reasonably require or;
  
  a place in the relevant locality where, on the two business days before the meeting a list of the names and addresses of the company's creditors will be available for inspection free of charge
  
  
• the notice of the creditor's meeting must be advertised once in the Gazette and once at least in two newspapers circulating in the locality of the company's principal place of business in the previous six months;
  
  
• the creditor's meeting must start between 10 am and 4 pm and be held at a place convenient for the creditors; a form of proxy must accompany the notice to creditors;
  
  
• the notice of the meeting must specify the time by and the place at which the proxy necessary for a creditor to be entitled to vote at the meeting must be lodged
  
  
• the directors must present a sworn statement of the company's affairs to the meeting of creditors;
  
  
• one of the directors must chair the meeting;
  
  
• the liquidator nominated by the members must attend the creditors' meeting and report on any powers exercised since the members' meeting.

Usually the liquidator, who will probably be the IP who has organised the meeting will conduct it on behalf of the chairman (a director). By custom creditors are allowed to ask questions about anything to do with the company's demise. If no other nomination is made the member's nomination will remain as liquidator. The creditors can put a resolution that someone else (who must be an insolvency practitioner and must have consented to act) is appointed.

Resolutions are passed by a majority in value of those present and voting, in person or by proxy.