INS48175 - Legal background: Statements of Insolvency Practice: What does SIP 8: ‘Summoning and holding meetings of creditors convened pursuant to Section 98 IA 1986’ say?


SIP 8 covers in great detail the way in which a liquidator should conduct Section 98 meetings. A full copy can be seen by clicking here. But some of the key points which you may find useful in working with liquidators are:

  • The liquidator must satisfy himself that the directors are aware of their responsibilities in relation to the convening of the creditors’ meeting. And he should obtain written instructions from the board of directors which clearly define the matters on which he is to advise (paragraph 4).
  • If the directors act contrary to SIPs the liquidator should carefully consider whether he should act. If directors act contrary to SIP 8 the liquidator must be able to show creditors it was without his knowledge or contrary to his advice (paragraph 5).
  • The liquidator should take all reasonable steps to ensure the list of creditors provided by the directors is complete (paragraph 12).
  • The liquidator should remember he has a personal interest when advising the director (as chairman) on the validity of proxies and so should consider suggesting that the chairman gets advice from an independent source, such as the company’s solicitor (paragraph 25).
  • The liquidator should be present at the Section 98 meeting (paragraph 30).
  • The following information should be provided to creditors at the meeting (paragraph 35):

Ref.

Information required

Provided?
YesNo
35(a)Details of any prior involvement with the company or its directors by the IP or proposed liquidator.
35(b)A report of the shareholders’ meeting including, if convened on less than 14 days’ notice, why
35(b)(i)
the date and time to which the meeting had been adjourned; and
35(b)(ii)
the fact that any resolutions passed at the section 98 meeting will come into effect if and when the winding-up resolution is passed;
35(c)Date on which directors gave instructions for meeting to be convened and date on which notices were despatched
35(d)The details of the costs paid by the company or on its behalf (including recipient, amount and source of payment) in connection with:
35(d)(i)
The preparation of the statement of affairs
35(d)(ii)
The arrangements for the creditors’ meeting
35(d)(iii)
Advice to the company or its directors in the period from the time the prospective liquidator was first consulted by or on behalf of the company or its directors (including nature of advice given)
35(d)the details of the costs paid by the company or on its behalf in connection with:
35(d)(i)
the preparation of the statement of affairs;
35(d)(ii)
the arrangements for the creditors' meeting; and
35(d)(iii)
advice to the company or its directors in the period from the time the advising members was first consulted by or on behalf of the company or its directors;
35(e)Report on trading history to include:
35(e)(i)
Date of incorporation and registered number
35(e)(ii)
Names of all directors and secretaries in previous three years
35(e)(iii)
Names of major shareholders and value
35(e)(iv)
Details of all classes of shares issued
35(e)(v)
Nature of business
35(e)(vi)
Location of business and address of registered office
35(e)(vii)
Details of parent, subsidiary or associated companies
35(e)(viii)
Directors’ reasons for failure
35(e)(ix)
Extracts from statutory/draft accounts for last three years and any previous period relevant to failure. Including details of
  • Turnover
  • Net result
  • Directors’ remuneration
  • Shareholders’ funds
  • Dividends paid
  • Reserves carried forward at year end
  • Date of auditors report plus any qualification therein.
35(e)(x)
Deficiency account (reconciles most recent balance sheet with Statement of Affairs)
35(e)(xi)
Names and qualifications of any valuers re Statement of Affairs and bases of valuation
35(e)(xii)
Such other information as the prospective liquidator considers it necessary to give the creditors a proper appreciation of the company’s affairs
35(f)If a receiver has been appointed over any assets of the company, the meeting should be provided with a report on the conduct of the receivership to date
35(g)Explanation of the contents of the statement of affairs

  • The meeting should be given details of any transactions (other than in usual course of business) between the company, any of its subsidiaries or any other company in which it has or had an interest and any one or more of its directors or any other associate of him or them during the period of one year prior to the winding up resolution specifying
  1. the assets acquired

  2. the consideration therefor

  3. the date of the transaction

  4. the date the consideration was paid

  5. the names & qualifications of those who advised upon it

  6. the dates on which any resolutions of the company authorising such transactions were passed

and whether the liquidator or any associate of his acted in any capacity in relation to the transaction (paragraph 36).
  • The liquidator should prepare a record of the meeting (paragraph 55).

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