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Colin Gaynor


Starting the CVL process

A company can be placed in liquidation via three processes:

  1. Members Voluntary Liquidation (MVL),
  2. Creditors Voluntary Liquidation (CVL) and
  3. via Court Order (Official Liquidation).

The preferred process initially depends on whether the Company is solvent or insolvent. Solvent Companies will almost always be placed into an MVL process whereas a CVL process should be initiated when a company is unable to pay liabilities as they fall due – and unable to trade out of this insolvent position.

It’s important that directors of insolvent companies understand how to instigate this CVL process. 

To place a company into CVL, both a members’ and a creditors’ meeting must be held, and a resolution to wind up the company must be passed:

  • The creditors’ meeting should be called, giving 10 days’ notice to enable all creditors to attend.
  • An advertisement calling the meeting must be published in two daily newspapers, again giving 10 days’ notice.
  • Proxies must be sent with the letter calling the meeting. If a creditor returns a proxy in favour of a nominee (e.g. the chairman) they are, legally, giving that nominee the authority to represent them (or their company/firm) at that particular meeting, and allowing them to vote on their behalf on any issue raised at the meeting.
  • The validity of a proxy is dealt with in subsection (5) and (6) of Section 183, which states that the proxy should be deposited at the registered office of the company concerned – or at any other place within the State as specified for that purpose in the notice convening the meeting.
  • The proxy shall be deposited 48 hours (or less if the Company’s constitution permits same) prior to the time of the meeting or adjourned meeting at which the person named in the instrument proposes to vote. In case of a poll, the proxy must be deposited 48 hours before the time appointed for the taking of the poll. If those requirements are not met, the proxies are deemed to be invalid.
  • The directors of the company must provide a statement of affairs and a list of all the company’s creditors, along with the estimated amount of their claims, to be presented at the meeting. One of the directors must be appointed to chair the meeting (if the company has a sole director, they must chair the meeting).
  • The members’ meeting must be called prior to the creditors’ meeting. Both must be held on the same day or, in the case of the members’ meeting, the day before at the earliest. The decision to wind up the company and appoint a liquidator must be made by the members and subsequently confirmed by the creditors at the creditors’ meeting. The resolution to wind up the company is an Ordinary Resolution and requires 51% of the members’ vote.
  • At the creditors’ meeting, the creditors have the power to nominate an alternative liquidator of their choice and the votes will be counted according to the weight of their claims; every €1 of debt owed to a creditor equals 1 vote.
  • The creditors also have the option to institute a Committee of Inspection to supervise the liquidation proceedings. From the creditors of the company, 5 people can be appointed. From the company members, a further 3 people can be appointed. The total number of members instituting the Committee of Inspection cannot be more than 8, or less than 2.
  • Any liquidator that is nominated to act as Liquidator must provide a written consent to act.

Once the liquidator is appointed, he assumes control of the Company’s affairs and will handle, amongst other matters, the creditors – realising the company’s assets and distributing funds in accordance with the Companies Act.

For support or additional information, please feel free to contact me, confidentially, on +353 (0) 1 598 0800 or colin.gaynor@sabios.ie.

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