Corporate Insolvency > Members’ Voluntary Liquidation

A Members’ Voluntary Liquidation is the process for winding up a solvent company. A company is solvent if it can pay its debts as and when they fall due. The objectives of this process are to:

• realise the assets of the company,
• distribute the proceeds to the shareholders in accordance with their rights after satisfying any creditor claims, and
• free shareholders of a corporate structure that they no longer require.

In a members’ voluntary winding up, the person to be appointed need not be a registered Liquidator if the company is an exempt proprietary company or a subsidiary of a public company. But in practice, a registered Liquidator is often chosen.

In order for a Liquidator to be appointed, a directors’ meeting is held to execute a Declaration of Solvency, stating that the company will be able to pay all its debts within 12 months. Attached to this declaration is a Statement of Assets and Liabilities. A general meeting of shareholders is then convened.

As the resolution for winding up is a special resolution, at least 21 days notice of the meeting is required to be given. However, this period can be shortened if 95% of shareholders consent to short notice.

Where a company, over which the creditor has security, is placed into Voluntary Administration, and provided that the secured creditor has an enforceable charge over the whole or substantially the whole of the company’s assets, it may, within ten business days of being notified of the Voluntary Administrator’s appointment, elect to appoint a Receiver in respect of its security. Alternatively, the secured creditor may allow the Administrator to remain in control of the company’s assets.

A Receiver may also be appointed by the Court in a variety of circumstances. The most frequent type of Court appointment is in respect of a partnership where, for example, the partnership is insolvent or the partners are in serious dispute. A Court appointed Receiver must act in accordance with the terms of the Court Order by which he or she was appointed. The Receiver will usually have powers to realise or at least manage the assets, the subject of the Receivership.

As a variation on a theme, a secured creditor may appoint a person, normally a registered Liquidator, to act as its agent whilst it is in possession of the property the subject of the mortgage. The mortgagee is able to direct their appointed agent to a greater degree than is possible under a Receivership, with the usual purpose of managing the property and realising the asset.

The above information is by necessity, general in nature and its brevity could lead to misunderstanding. For further information, you are invited to contact O’Brien Palmer.