1. Rule 4.219 of the Insolvency Rules 1986 provides:

"In a winding up by the court which follows immediately on a voluntary winding up (whether members' voluntary or creditors’ voluntary), such remuneration of the voluntary liquidator and costs and expenses of the voluntary liquidation as the court may allow are to rank in priority with the expenses specified in Rule 4.218(1)(a)."

A practice appears to have arisen of voluntary liquidators, on ceasing to act in consequence of a winding-up order, deducting outstanding costs and expenses of the voluntary liquidation, and outstanding remuneration, and remitting only the balance of funds left (if any) to the OR, who is then obliged to apply to court to challenge the amount deducted.

In our view, where a voluntary liquidator, on ceasing to act contends that there are expenses which he has properly incurred and which should be repaid, or has earned remuneration not yet received, it is his responsibility to apply to the court under Rule 4.219, and not that of the OR. Any expenses or remuneration outstanding at the point when the voluntary liquidator ceases to act should not be deducted from the balance remitted to the OR.

2.    Disciplinary Proceedings Arising from Breach of Regulation 5(2) of the Insolvency Regulations 1994

The Service has complained to a practitioner's professional body about funds he had retained which ought to have been remitted to the ISA under Regulation 5(2). The professional body took disciplinary proceedings against the practitioner and the complaint was proved, on the practitioner's own admission. The practitioner was censured, fined £10,000, and ordered to pay costs of £500.

Although this case was exceptional in that it involved substantial funds, it is a reminder to practitioners that the Service considers the non-payment or late payment of funds into the ISA to be a serious matter. Practitioners are also reminded that persistent failure to adhere to the guidance relating to the remittance of funds, or a failure involving substantial funds, will result in further action by the Service. That may include, where appropriate, referral to the practitioner’s professional body.

Contact: Gareth Limb, insolvency practitioners Control Unit, The Insolvency Service, 5^th Floor, Ladywood House, 45/46 Stephenson Street, Birmingham B2 4UZ (telephone 0121 698 4000)

(First published in Dear IP no. 46, July 1999)

This Regulation provides that in the case of a voluntary winding up the liquidator shall, within 14 days of the expiration of the period of six months from the date of his appointment and of every six months thereafter, pay the balance of funds in his hands not required for the immediate purposes of the liquidation into the Insolvency Services Account (ISA).

Some practitioners have interpreted this regulation as only relating to Creditors Voluntary Liquidations. In fact, it relates to both forms of voluntary liquidation, and accordingly liquidators of companies subject to Members’ Voluntary Liquidations must pay monies into the ISA as appropriate.

Practitioners should now ensure that they have adequate systems in place to enable them to comply with the above requirements.

4. Winding-up resolutions - changes made by the Companies Act 2006 

The Companies Act 2006 has made various changes to the rules relating to company meetings and resolutions.  Insolvency practitioners should note that some of these changes affect the resolutions that need to be taken to put a company into liquidation. Some of the new provisions are subject to contrary provision in the company’s articles, and some of them are not. 

With effect from 1 October 2007, section 84(1)(c) of the Insolvency Act 1986 was repealed.  This was the section which provided that a company may be wound up voluntarily ‘if the company resolves by extraordinary resolution to the effect that it cannot by reason of its liabilities continue in business and that it is advisable to wind up’.  Accordingly, with effect from that date any winding-up resolution, whether or not the company is insolvent, needs to be taken as a special resolution under section 84(1)(b).  This is not subject to any contrary provision in the company’s articles. 

Furthermore, the period of notice required for a meeting of a private company at which a special resolution is to be proposed was reduced from 21 days to 14 days under section 307(1) of the Companies Act 2006 (‘the Act’), also with effect from 1 October 2007.  However, under section 307(3) of the Act the company’s articles of association may specify a longer period of notice. 

Meetings of a private company may be called on shorter notice where a majority of the members who hold 90% of the voting rights agree. However, the company’s articles of association may specify a higher threshold.  For a public company, a 95% majority is required. 

With effect from the same date, references to extraordinary resolutions in section 165 of the Insolvency Act 1986 (powers of liquidator in voluntary winding up) were replaced by references to special resolutions. 

Any enquiries regarding the above should be directed toward Toby Watkinson, IP Policy Section, Area 5.7, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7637 6566; email: toby.watkinson@insolvency.gsi.gov.uk  

General enquiries may be directed to IPPolicy.Section@insolvency.gsi.gov.uk

Telephone: 0207 291 6772