Liquidation in Ireland – winding up a company
Liquidation (also known as, winding up a company) can happen in a number of different ways. The result is that the company is wound up and ceases to trade (i.e. the company is dissolved). The process of liquidation can vary and in Ireland there are three main types of liquidation.
The three types of liquidation are:
1. Creditors’ voluntary liquidation
2. Members’ voluntary liquidation
3. Courts appointed liquidation
1. Members’ Voluntary Liquidation
In the case of a members’ voluntary liquidation the company is solvent, meaning that it is in a position to pay off the debt it owes to its creditors. The members’ voluntary liquidation procedure can be summarised as follows:
- The members of the company (its directors) hold a general meeting to wind up the company, place it in members voluntary liquidation and appoint a liquidator and distribute the assets.
- The company must pay its creditors in full so this requires that the directors of the company must swear a Declaration of Solvency within 28 days in advance of the general meeting exhibiting a Statement of Assets and Liabilities. The statement must include a report of an independent person qualified to be an auditor to the company.
- Once the liquidator is appointed, the directors’ powers cease.
2. Creditors’ Voluntary Liquidation
Unlike a members’ voluntary liquidation, a creditors’ voluntary liquidation occurs when a company is unable to pay its debts (insolvent). The creditors’ voluntary liquidation can be summarised as follows:
- The shareholders of the company attend a general meeting to discuss. On the same day of the shareholders meeting a creditors meeting must be help also. It is important to note that the creditors meeting must have been adequately advertised for at least 10 days prior to the meeting and all creditors must be notified.
- A director of the company must chair the meeting. All creditors must be given a Statement of Affairs and be given the opportunity to ask questions.
- The meeting must be attended by the liquidator, this is to report on what has occurred since their appointment. The creditors may confirm the liquidator’s appointment or nominate an alternative and a Committee of Inspection may be appointed which will represent both members and creditors’ interests.
3. Compulsory Court Liquidation
Unlike the members’/creditors’ voluntary liquidation, a compulsory court liquidation occurs when a creditor has not been paid by its debtor and believes that the company is insolvent and cannot pay the debt owed to them. This form of liquidation is provided for by legislation and permits that High Court to order that a company be wound up usually because the company is unable to pay its debts as they fall due. In order to avail of this, a creditor (or creditors) of the company itself can petition the Court for an order to wind up the company. The Court will hear the petition and make its decision. If the Court orders that the company be wound up then an Official Liquidator is appointed.