Client Portal
7 July 2015
Category FAQs

The primary aim of an appointed liquidator is to close a business down, sell its assets and raise cash to pay off as much creditor debt as possible. It doesn’t matter whether it is compulsory or voluntary liquidation; the result will be exactly the same despite the steps taken to get there. In this process all primary duty is placed with all of the insolvent company’s creditors. Shareholders are then placed next on the pecking order of precedence. For this reason, shareholders rarely receive a dividend in an insolvent liquidation process unless they also have a creditor claim.

Shareholder Rights

In a liquidation process put forward by the Court (i.e. compulsory liquidation) the appointed liquidator is not required to report to any shareholders or provide an update on proceedings. In this situation shareholders have no legal right to this information. A liquidator is also not required to hold a meeting of shareholders throughout a CVL, but a joint meeting of creditors and shareholders must be hosted at the conclusion of the process.

Committee of Inspection

In both types of liquidation (compulsory and voluntary) shareholders can request that the appointed liquidator host a separate meeting of shareholders and creditors to decide whether or not a committee of inspection is suitable. If so, it must be decided who will represent both parties on the committee. The shareholders who make the request must cover all the associated costs.

A committee of inspection provides an approval process for the liquidator’s fees and also, in some circumstances, provides an approval process for the use of some of their powers. The transfer of shares or a change of shareholder status must have written consent from the liquidator or the Court. In this process, a liquidator can call for any holders of unpaid shares to pay the amount outstanding.

Capital Loss

Should a liquidator present a written declaration that states there is very little likelihood that shareholders will receive any further distribution, shareholders can realise a capital loss. In order to do this, all shares in the company must have been purchased after the 20th of September 1985. If no such declaration has been made then the final deregistration of the company will enable realisation of any capital loss.

If you are a shareholder of a company that has been placed into liquidation, it is recommended that you seek tax advice regarding your ability to realise a capital loss.

Contact us for more information on this or any other matters involving insolvency.

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