CHECKING THE LIQUIDATOR
Checking The Liquidator prior to appointment is essential. Trust is vital. 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 once appointed has distinct powers as detailed in “Schedule 4, Insolvency Act 1986“.
Once appointed, the Creditors can set up a Liquidation Committee. 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.
Checking The Liquidator – 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 a maximum of five are required to sit on the committee. Once agreed, the committee then 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 due to the company
- accept security for clearance of a debt
The committee reviews the appointed Liquidator’s insolvency bond and 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. Any changes, need to be brought to the committees’ attention and if required, sanctioned by them for the Liquidator to progress. They may be: –
- selling high-value critical assets
- Payments by way of dividends to unsecured creditors
- Potential legal action which if lost could incur further cost to the Liquidation
- writing of assets with no perceived value
Checking The Liquidator – Fees:
The “Liquidation committee” agrees on the Fees the Liquidators receives at the first meeting of Creditors?
Liquidators 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, therefore, may bill up to the agreed amount. However, when the time has taken is excessive, the Liquidator may go back to the committee for more.
After the first year of the Liquidation, all Creditors receive an annual report including accounts for receipts and payments whilst in Liquidation.
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