Why Is A Statutory Declaration Of Solvency Required?
What is the Statutory Declaration Of Solvency? This is a requirement in a Members Voluntary Liquidation in light of Section 89 of the Insolvency Act 1986.
Declaration Of Solvency By The Directors
The Declaration of Solvency must be undertaken by a majority of the Directors. The Directors must declare that having made a full enquiry of the company’s finances that it can in their opinion pay its debts in full, with interest within 12 months.
What Are The Requirements Of A Statutory Declaration Of Solvency?
A declaration of Solvency must be made within 5 weeks of the date of the passing of a winding up resolution for Members Voluntary Liquidation.
It must have a statement of the company assets and liabilities at the last realistic date before the making of the declaration of solvency.
Filing Of The Statutory Declaration Of Solvency
The filing of the Statutory Declaration of Solvency must be undertaken within 15 days of the passing of the winding up resolution for Members Voluntary Liquidation.
Impact On Timing Of A Distribution To Shareholders
There is no impact or influence arising from the Statutory Declaration of Solvency on the timing of a distribution to company shareholders.
Except if there are no assets to distribute and no creditors, a Statutory Declaration of Solvency highlights that according to the Directors’ declaration there ought to be in their view a distribution made. However, it is no substitute for the Liquidator going through the statutory procedures.
The timing of a distribution is typically influenced amongst other things by Rule 14.30(c)(ii) of the Insolvency Rules (England and Wales) Rules 2016. As a result a distribution typically will not be made less than 21 days prior to the date of the winding up resolution being passed.
In practical terms, the distribution usually would have to await HMRC clearance which can explain why a Members Voluntary Liquidation can sometimes take so long.
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