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distribute proceeds to creditors (in the statutory order or priority) and with any surplus to members. There are statutory restrictions which make it hard for a liquidator to continue a business. All powers of directors cease on the appointment of a liquidator unless otherwise sanctioned by members (in the case of a members’ voluntary liquidation) or creditors (in the case of a compulsory or creditors’ voluntary liquidation). 2.5. Directors’ liabilities for prior conduct : 2.4. Ongoing directors’ functions: Liquidators in compulsory liquidations or creditors’ voluntary liquidations will make some investigation into the directors’ conduct in the period leading up to liquidation to assess whether to recommend that they be disqualified as directors (the final decision as to whether to apply to court for disqualification in this situation is taken by a government department). They also have powers of investigation and to enforce claims in the liquidation. 2.6. How do members voluntary liquidators differ? A member’s voluntary liquidation involves no investigation of directors’ conduct and no reputational damage. However, directors must formally declare a statement of the company’s solvency before starting the process, for which there can be personal liabilities if insufficient care was taken in its preparation. 2.7. What happens at the end of the liquidation? After completing reporting and closing procedures the liquidation
will be closed and the company dissolved.
3. What is dissolution? 3.1. Outline: Dissolution of companies can be initiated by Companies House (the UK companies registry) if they fail to file annual returns or accounts, at the end of a liquidation (see above) or through an application from the company’s directors. This voluntary dissolution is an administrative process used by dormant companies with no remaining assets and liabilities. It is less expensive than a liquidation, does not require an insolvency practitioner, and involves no investigation of directors’ conduct or stigma. However, it is not appropriate where there are assets or material creditors. 3.2. What is the process? If directors can
confirm that a company has been dormant for at least 3 months, they can apply to Companies House (the UK companies registry) to have the company dissolved. A copy of the application must be sent to interested parties. Companies House will advertise the application and if no objection is received, the company is dissolved. It then ceases to exist, and any remaining assets will vest in the state. Interested parties can apply to restore a company to the register – often to pursue litigation or realise assets. The procedure for restoration varies depending on the nature of the initial dissolution.
4. How does administration differ? 4.1. Overview : Administration is the main
procedure for rescue of trading business. An administrator must be an
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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