bonded liquidators?

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Frankie22

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Hi, my small business is going into voluntary liquidation.
This is new territory to me. I have been put in touch with an accountancy firm who specialise in this area. It has been explained to me that I will sign a resolution to liquidate the business, the liquidator will open an account to receive the assets & funds of the company. Some funds will be witheld to cover claims from creditors but the majority can be quite quickly passed to me personally. Now this is where I'm going to sound a little paranoid.......how am I protected if the liquidator goes bust before I receive the funds or indeed if he decides to delay passing over those funds to me. Are liquidators bonded for example or is there any other form of industry protection in place?

Many thanks in advance
 
It depends on who you are going with as Liquidators, eg, when I did members voluntary liquidations, we had a professional indemnity insurance, as would most accountancy practices.

The reality of it too is that anyone can be a Liquidator, you do not have to have any qualifications.

Members Voluntary are one of the easiest liquidations to run.

Steps are as follows:

Members hold an EGM appointing the Liquidator.

The following forms are lodged with CRO
E2 (Appointment of Liquidator)
B2 (Change of Address of Company)
G1(Resolution appointing Liquidator)
Form 12 - this is where the Directors swear a declaration (witnessed by Solicitor/Commissioner) declaring the company is Solvant and can pay its debts. The accountant lodges a statement of affairs outlining assets/liabilities there at the commencement of the Liquidation.

On the same day, Liquidator sends copies of these forms to Bank, local Revenue and Liquidation Section.

Also informs Iris Oifigiuil.

Your Bank Account is closed and a new account is opened in the name of the Liquidator. The Liquidator has control of any assets/etc.

Any assets are then distributed to the members during the course of the Liquidation. Also, any outstanding taxes/bills etc are discharged by the Liquidator.

The Liquidator then pays any outstanding bills, requests clearance from Revenue to hold the final meeting. Once this comes, bank account is closed, newspaper ads placed and Bob's your uncle. Liquidator lodges final forms with CRO.

It can take anything from 6 weeks to over a year, depending on what is involved....ie, cash or property.

Also, depending on what was in the company, some people had paid off all their creditors and had only cash left as an asset, we would pay them 70% of the cash as an interim distribution and then once the Revenue clearance came through pay the balance.

The Liquidator has nothing to gain by sitting on your file...we used to try and process them as quickly as possible.....because otherwise you are clocking up hours revisiting the file.

I have simplified it down a bit, but that is the main jist of it...hopes it helps..
 
Hi Frankie

Why are you going into voluntary liquidation at this stage?

If the company is solvent but losing money, you can just stop trading.

Collect the debtors. Sell the stock and other assets. Pay off the creditors.

You will be left with a company which only has cash in the bank account.

The liquidation would then be quick and cheap. You could probably get a friend to act as liquidator and get a company secretary firm to look after the paperwork.

Brendan
 
Firstly, MandaC I really do appreciate your very comprehensive and considered advice & I will take this completeley on board.

Brendan, we stopped trading a few months ago so as you suggest, all creditors are paid off, its really just whats left over, ie some cash in the bank. its very straight forward, our concern now is that if CGT goes up in April, it might eat up a considerable portion of whats left after 12 years of 80 hours aweek.

We really are quite concerned because at 22.5% we could probably do a bit better than break-even if you consider whats gone into our business from a personal level over the years, if Capital gains goes up significantly, we are sort of screwed. thanks one more in advance for any & all advice. Frank.
 
Then, go to a company secretarial specialist and get it done immediately.

I don't know the timescale, but if there are no creditors, I doubt if anyone would object if you do it very quickly.

Have you taken tax advice on it? Depending on the amount, you probably should. However, if the main objective is to dispose of it before CGT rises, you might not have time for tax advice.
 
If no taxes due and all creditors paid, liquidation could be finished in approx. 5-6 weeks. Funds could be paid out to shareholders once the liquidation starts and liquidator appointed with CRO and takes over Bank Account.
 
The liquidator will have to advertise for creditor claims and allow 21 to 28 days. However most liquidators will be willing to distribute most of the funds on the day of liq if you are willing to indemnify him against any claims arising. That way you will get your hands on the money without any risk of him making off with it. Make it clear you will only appoint the liquidator on the understanding that he makes an immediate ditribution to the shareholders. All you need to leave is enough funds to pay his fees.
You will need a letter from Revenue Com saying all tax affairs up to date and all tax os paid. Liq can cost 3 to 5K.
 
Thanks to all for this valuable advice, I will seek tax advice 1st think Monday morning but to echo my original question, is there any form of industry protection for someone like me who is dealing with a liquidator who may find themselves unable or unwilling to distribute the remaining funds?
Is there for example a list available somewhere of approved/bonded practitioners?
The Financial Regulators Office tell me the guy I'll be dealing with is registered with them but as I am a business (and not a consumer!!!!!) they cannot offer me advice in this regard.......wonderful!
 
To the best of my knowledge, no liquidator has gone out of business or run off with anyone's funds.

Any member of the Institute of Chartered Accountants must have professional indemnity, and I imagine it's the same for members of the other bodies.

Your main concern should be efficiency and cost and not the risk of losing your money.
 
Can undertstand paranoia given the current climate out there, but you will be fine. €3K to €5K as outlined above is a fair quote. If there is nothing left only cash to be distributed and all else paid, I would be looking towards the bottom end of that quote.
 
Thanks MandaC, you mentioned in an earlier response that they might retain some 30%

"Also, depending on what was in the company, some people had paid off all their creditors and had only cash left as an asset, we would pay them 70% of the cash as an interim distribution and then once the Revenue clearance came through pay the balance."
Any idea how they might respond to me suggesting that they transfer 70% immediatley to my personal account & sit on the 30% for the standard period, all this is assuming I personally indemnify them against any creditor claims (which there will not be I should add). This would make me more comfortable. Do you or anybody else there know if this suggestion might be acceptable to them, given the rules I suspect liquidators have to operate within?
 
You would have to negotiate with whomever you get to undertake the liquidation.

All of our Members Voluntary Liquidations came through Accountants with whom we had long standing relationships, so we were quite confident of the clients backgrounds.

If there was nothing else in the Company (only cash and depending on the amount) (which was exactly as outlined on the statement of assets and liabilities, matched the Bank Statement provided from the client, etc) on the Form 12 which was due back to the shareholders, then we would ask the shareholders to sign a letter of indemnity and once the Liquidation papers were lodged with CRO, would authorise the Bank to pay the Shareholders 70% of what was in the Bank Account. It usually took about 5 days from when the Liquidation papers were lodged with CRO - (to complete Liquidators Mandate with Bank Account, etc) The final distribution would issue when Revenue confirmed all taxes were paid, etc and just before the Newspaper notices were placed and the whole thing finalised.

I've worked in two practices that operated that way and have never once had a problem with a client. Liquidations (especially Members Voluntary ones, are nice work if you can get it and usually have little hassle attached) so you are the client in this case and the Liquidator will want to work with you.

I will add that part of our agreement as Liquidator was that our Fees were paid out of Liquidation account, once Liquidation commenced too.
 
You can also arrange for say 70% of the funds to be distributed on the day of liquidation. It just means that you and the liquidator will need to arrange the transfer of funds from the existing bank account so no time is wasted. I have done this where there are large sums involved which the sharelolders quite rightly do not want to lose control of.In Northern Ireland
a liquidator takes a bond out on each case to cover any loss of money though this does not apply in ROI
 
Thanks once more guys, callaghanj, I will discuss this option with the liquidator & thanks also for clearing up that question re being bonded. I'll post back & let all know how I got on.
 
My fears were unfounded I'm glad to say, its done & dusted, the liquidator nwas a pleasure to deal with, professional, pragmatic and human.
Thanks to all.......!
 
Brendan said:
To the best of my knowledge, no liquidator has gone out of business or run off with anyone's funds.
Click to expand...

I appreciate this is an old post but there have been several cases of liquidators using funds for personal use. Sorry that i cannot think of names of cases at the moment.
 
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