How to Appoint an Insolvency Practitioner in Scotland
What you Need to Know Before You Appoint an Insolvency Practitioner in Scotland.......
There are 3 ways to liquidate your company in Scotland.
Creditors’ Voluntary Liquidation
The shareholders and directors agree to put the company into liquidation because it’s insolvent and can’t pay its debts as they fall due.
After that decision has been taken, the directors will work with an Insolvency Practitioner to send a notice to all the creditors and shareholders of the company.
The Insolvency Practitioner will prepare an Estimated Statement of Affairs which will be sent to all creditors and shareholders.
This will set out the financial position of the company and how much the liquidator expects to realise by selling the company’s assets.
The liquidator will also calculate how much will be left over to be paid to the company’s creditors.
A meeting of the company’s creditors will only be called if 10% of the company’s creditors in value or number request it.
A Compulsory Liquidation is where a liquidator is appointed by the court.
This will normally be the result of a winding up petition that has gone before the court stating that the company can’t pay it’s debts and should be wound up.
In this situation the directors and shareholders will have no control over the situation and the petitioning creditor is likely to choose the liquidator.
When the liquidator is appointed he will prepare the same information for creditors as with a Creditors Voluntary liquidation.
Members' Voluntary Liquidation
A Members Voluntary Liquidation is where the company is solvent and the shareholders (members) decide to close the company.
With a Members Voluntary Liquidation all creditors are paid in full within 12 months.
The company will stop trading and the liquidator will proceed to sell all the company’s assets and pay the company’s debts.
The amount left over will be returned to the shareholders.
There may be some tax advantages to a Members Voluntary Liquidation if your company has assets.
If the debts are not paid within 12 months the Members Voluntary Liquidation will become a Creditors Voluntary Liquidation.
Differences between Insolvency in Scotland and England.....
The main difference between insolvency in Scotland and insolvency in England is that in Scotland there’s no Official Receiver.
Therefore in Scotland an Insolvency Practitioner has to be appointed immediately.
A provisional liquidator can be appointed by the court in the case of a compulsory liquidation.
Keep in mind that Insolvency Practitioners never work for you.
After you appoint a liquidator you will have no control.
Insolvency Practitioners are required to investigate all actions taken by directors in the 3 years before the insolvency.
They will be looking to see if the directors diverted any funds away from the company when they knew it was insolvent.
They might even try to hold you personally liable for some of the company’s debts.