Solvent Company Winding Up

A company may decide to wind up its affairs if it has fulfilled it purpose. Also, it may also be a case for the directors who have nobody to succeed them and decide to retire both the business and themselves, for that matter the directors may elect for a Members Voluntary Liquidation.

The advantage of this is any gain on the shares may be liable to tax a lower rate of tax than that at the relevant income tax rates.

In order to place a company into a Members Voluntary Liquidation, the directors must swear a Statutory Declaration of Solvency. The declaration is summary of the company's assets and liabilities and the directors state that the company will be able to pay all of its debts in full within 12 months of the commencement of the Liquidation.

If the declaration were found to be inaccurate then the directors could face serious consequences.

Declaration of Solvency

In a members' voluntary winding up of a company, a Declaration of Solvency must be delivered to the Companies Registration Office pursuant to Section 256 of the Companies Act, 1963 as amended by Section 128 of the Companies Act, 1990. The Declaration of Solvency shall have no effect unless it is made within 28 days immediately preceding the date of passing of the resolution for winding up the company.

The Declaration of Solvency (Form 12) must embody a statement by an independent person that s/he has given and not withdrawn her/his written consent to the issue of the declaration with the report attached thereto.

 

In addition to the above, a Declaration of Solvency must have the following attached:-

A report by an independent person made in accordance with Section 128 of the Companies Act, 1990, and signed by the independent person.

  • A statement by the independent person, marked with the letter "B", that s/he has given and not withdrawn her/his written consent to the issue of the declaration with the report attached. This statement must bear the original signature of the independent person.
  • The Statement of Assets and Liabilities made at the latest practical date before the making of the declaration, and in any event not more than 3 months before the making of the declaration, marked with the letter "A" and embodied in the Declaration of Solvency, must bear the original signature of each of the directors making the declaration.

 If the Declaration of Solvency is not made and delivered in accordance with Section 256 of the Companies Act, 1963 as substituted by Section 128 of the 1990 Act, it is ineffective and the winding up then becomes a Creditors' Voluntary Winding Up. Section 266 of the Companies Act, 1963 then applies.

However, it would not be possible for a liquidator to comply with the provisions of Section 266 of the Act, which requires that a meeting of the creditors be called at least 10 days before the date of the meeting of the company and that it be held on the same day or the day after the meeting of the company at which the resolution to wind up is passed.

 

N.B.       Therefore, it is of utmost importance that the Declaration of Solvency is thoroughly checked as regards signatures, dates, and compliance with the provisions of the Companies Acts, before submitting for registration in the Companies Registration Office.

 

Contact us to arrange a meeting

Contact one of our team to discuss how our services may assist you and your business. We can develop a time line of key dates leading up to placing a company into liquidation.

 

 

 

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