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Checking The Liquidator.
Checking The Liquidator prior to 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 then can set up a Liquidation Committee. Therefore, allowing the Creditors to check and bring to the attention of the Liquidator, matters that then may require investigation or questions over their conduct, during the appointment.
What is a Liquidation Committee?
Once the first meeting of Creditors is then in place, creditors attending and voting, set up a “Liquidation Committee“. At least three members up to a maximum of five are therefore 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 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, then 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 way of dividends to unsecured creditors;
- Potential legal action which if lost then could incur further cost to the Liquidation;
- writing of assets with no perceived value.
Checking The Liquidator – Fees:
The “Liquidation committee” therefore 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 then 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.
Then, 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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