Process of Company Liquidation

Hi all

We have a company that is not doing well at all (showed loss last year) and we are thinking of liquidating it. Hope to get some advice.

Here is the situation:

1) We have a lease for the shop unit in a shopping centre and owes rent since Jan 09. But nearly half the shops in the centre had closed down and vacated since we moved in 3 years ago. We have been trying and trying to negotiate for rent reduction but they have done nothing.

2) We owe rates to the council

3) Other than that, we have no other creditors.


* Can anyone let me know the whole process of Liquidation? I presume the shopping centre owner would challenge us to get rent back?

* My biggest concern would be: Would an audit be part of the Liquidation process? Or rather can the shopping centre owners invoke an audit on our company because we owe them money + we have another profitable biz in the same company which we are in the process of transferring out of this company. (but this shop unit we are talking about is the shop that is causing an overall loss in the company)

Sorry this sounds complicated. Any advice from people with experience in Legals or Liquidation?

Thanks

MsOp

Hi

How much would it cost to buy out of the lease and would the company still then be solvent after this is paid.

Unless your creditors are somehow shareholders of the company, they cannot demand an audit. However they can still persue the company for the debt and in certain circumstances persue the directors personally.

You can have your company voluntarily struck off relatively easily once it is solvent. However it can be reinstated by your creditors at any time up to 20 years after stikeoff. You will also have to make a signed declaration that the company has no assets or liabilities.

The other method is to officially liquidate by appointing a liquidator to wind up the company. This will cost you more but I believe will offer you more protection from creditors in the future.

You also mention that you are transfering a profitable trade out of the company. As directors of the company you are required to safeguard all the assets of the company. You need to be careful that you are not seen to be denuding it of its assets in deference to other creditors.


Hope this helps



DB

DB

Yes we will be looking into appointing an official liquidator if we decide to go ahead with this. There is no option of buying out of the lease becasue the shopping centre has 50% tenancy gone as footfall is so bad. They would not entertain this.

Would you be able to tell me if the process of liquidation is an audit in itself? As in would every crevice be scrutinised by the liquidator? Or is the liquidator's job just to fold up our loss making company?

Thanks.

MsOp

Hi

Simply put, the directors decide that the company cannot continue to trade due to losses. It calls a meeting of the shareholders to pass an ordinary resolution of the company to put the company into liquidation. A meeting of the creditors must then be called and a liquidator is appointed as a result of this meeting.

The liquidator is appointed to distribute the assets of the company to its creditors in the correct manor. He takes over the company from the directors who now have no power to direct the company. He will not be interested in carrying out an audit of the company as such. However he does have a responsibility to report to the Office of the Director of Corporate Enforcement on the role of the directors in the company's affairs and whether they have conducted themselves in accordance with Company Law.



DB

A liquidatior will be required to report to the ODCE as to the reasons for the insolvency of the Company, he/she will also be require to review the Company's affairs for a period of 3 years or so prior to the date of liquidation. In some senses, this is like a mini audit. However, the liquidator has a duty to the creditors of the Company and would have to ensure that any assets belonging to the Company are available for distribution on liquidation.

I would be concerned about the transfer of business you speak about. If this includes assets (i.e debtors, customers listings, etc) of the main business, a liquidator can persue you for the recovery of same.

If possible, you should speak with an Insolvency expert before you do anything so that he/she can explain the liquidation process.

Also, a liquidation can be awkward process in that it will go on for over 12 months while the Liquidator awaits the decision of the ODCE in respect of the Insolvency of the Company and the potential consequences on the directors.

The shopping centre will come after the Insolvent Company for the arrears of rent and may get a dividend. However, if you have a personal guarantee on the rent, the shopping centre will chase you. This is something you should check as the liquidaton of a Company does not revoke personal guarantees with banks or landlords.

Another matter here is the cost of a liquidation. From the sounds of things, I doubt you would get change out of €20,000 + Vat, especially if the creditors prove to be a problem.

In terms of liquidations, I would recommend Friel Stafford, their website is www.liqudation.ie.

If you decide you're better off paying the creditors and striking off voluntarily, I would recommend www.mystrikeoff.ie.

Either way, I agree with the others that the transfer of a viable business and assets from this company prior to liquidation will cause you problems...

You can get a straight forward liquidation completed for approx 10k-15k plus VAT.

Cheaper if you use a provincial liquidator. I can get liquidations done for 6-7 k insolvent liquidation. 3-4k solvent liquidations.

6k-7k must for a very straight forward insolvent liquidation. No Liquidator would take on a liquidation at that price if there was considerable creditor issues, landlord/premises access, legal problems, etc.

I doubt you are looking to appoint an official liquidator as this involves applying to the High Court and that process itself can cost over 10k!

The process and the answers to your questions depends on whether the company is solvent or insolvent!

In short if the company is solvent all creditors must be paid up to the date of liuiqdation. I note the post that the company can be reinstate withing 20 years this is not the case, if the company is liquidated it cannot be reinstated after 3 years.

It sounds like your company may actually be solvent but that part of the business as a unit is insolvent! Transferring the profitable business unit out is risky business because it is illegal to do so and this transaction will have to be brought to the attention of the Director of Corporate Enforcement.

However, if the company is insolvent perhaps you should liquidate the company and then consider "buying" the profitable company off the liquidator. There is a potential problem with this idea as the liquidator has to get the best price for all of the assets of the company and therefore will have to offer the business to the public. However, if your profitable business is not likely to attract much interest you are relatively safe and also the liquidator will be looking to do a quick deal and therefore it could illiminate anyone who does not have adequate finance ready to go. But the big problem with this option is that the creditors/suppliers of the profitable company may not want to work with you going forward and this could be a serious problem.

As for your landlord and the question of an audit this will not apply if you look to have the company audited. However, if you are not up to date with your submissions to the Companies Registration Office you will have a black mark against you and this will have to be brought to the attention of the Office of the Director of Corporate Enforcement. But do not worry this is only a small black mark unless it can be shown that your failure to prepare financial statements was a factor in the company ending up in the current situation.

The rates due to the county council are rank as preferential creditors.

the liquidator is required to investigate the company and to establish why it failed and report his/her findings to the ODCE. Unless you have acted in a dishonest manner you have nothing to fear from the liquidators investigation.

As you can see you are into a mine field, by asking a simple question you have gotten more questions back. I recomend that you go to talk to an insolvency practitioner or an insolvency lawyer.

I had a shop out in Tallaght and used www.ccrs.ie and www.efc.ie