SFA InfoLeaflet15 by wuzhengqin


									SFA InfoLeaflet15                          21/07/2008       16:59    Page 1

   Ref: No 8 September 2008

                                                      Simple Facts of Accounting
                                                                                                                           from infoCPA

                                                                                                 Creditors’ Guide to
                                                No:15                                            Creditors Meetings

                                      In many cases the first indication that a supplier gets of a customer being in financial
                                      difficulty is the Notice of a Creditors Meeting.

                                      Section 266 of the 1963 Companies Act states that notices of the meeting of creditors
                                      must be sent by post to the creditors at least 10 days before the date of the meeting
                                      with proxy forms. Notice of the creditors meeting must also be advertised in two daily
                                      newspapers circulating in the vicinity of the registered office or principal place of business
                                      of the company

                                      The notice sent to the creditors convening the meeting must attach a general and special form of proxy.

                                      Generally speaking, if a creditor wishes to ensure that its choice of liquidator is appointed, then it needs to seek
                                      the support of as many creditors as possible and encourage them to return proxies that are validly completed
                                      and are in favour of the creditor’s representative.

                                      The creditors of the company will either be limited companies or creditors who are owed monies personally.
                                      The rules governing the conduct of creditors meetings state that a proxy representing a limited company must
                                      be appointed:

                                           under the common seal of the company
                                           under the hand of some officer duly authorised who must state that fact on the proxy form.
                                      In practice, to avoid any dispute over the admissibility of a proxy submitted by a limited company, it is advisable
                                      that the person duly authorised who signs the proxy on behalf of the creditor writes in beneath his name the
                                      following term: "Duly authorised officer of the company".

                                      Statement of Affairs
                                      The directors are obliged to present a full statement of the position of the company's affairs, together with a list
                                      of creditors of the company and the estimated amount of their claims to the meeting of creditors. The
                                      statement should show the book values of the company's assets with the directors estimated realisable values
                                      in a winding up.

                                      Chairman’s Statement
                                      At the creditors meeting the nominated director, who acts as chairman of the meeting, will give a brief outline
                                      of the history of the company and details of the causes of failure.

                                      Voting on the Nomination of the Liquidator
                                      The nominated liquidator should not have previously acted for the company or its directors in a professional
                                      capacity. In order for the creditors to over turn the company's nomination of liquidator, Section 267 of the
                                      1963 Companies Act states that they must have sufficient votes in value of the creditors represented to carry
                                      the resolution.

                                                                                                      The Institute of Certified Public Accountants in Ireland

                              The Institute of Cer tified                                                              Small Firms Association
                              Public Accountants in Ireland
                                                                                                                       84/86 Lower Baggot Street,
                              17 Harcour t Street, Dublin 2, Ireland                                                   Dublin 2
                              Phone     01 4251000                                                                     Phone    01 605 1500
                              Fax       01 4251001                                                                     Fax      01 661 2861
                              Email     cpa@cpaireland.ie                                                              Email    info@sfa.ie
                              Web       www.cpaireland.ie                                                              Web      www.sfa.ie
SFA InfoLeaflet15          21/07/2008             16:59         Page 2

                     Format of the Creditors Meeting
                       Generally speaking, the creditors meeting will take the following format:
                             The creditors will be handed a copy of the directors estimated statement of affairs.
                             The nominated director will read out his statement outlining the company's history and causes of
                             Any creditors present may then ask questions.
                     Creditors are provided with an opportunity to appoint their choice of liquidator. A formal vote may be
                     taken on the appointment of a liquidator.
                     Creditors are provided with an opportunity to appoint a Committee of Inspection. The creditors are entitled
                     to nominate up to five people onto this committee, and the shareholders are entitled to appoint three
                     people. The purpose of the committee is to assist the liquidator in carrying out his duties. The committee
                     can also approve the liquidator’s fees.

                       Questions asked at the Creditors Meeting
                     The creditors are entitled to ask questions that relate to the company's affairs. Some creditors will send along,
                     or attend the meeting with, professional representatives who are very knowledgeable about insolvency
                     matters. A flavour of some types of questions that may be asked are set out below:

                       1. When did the company cease trading? (A creditor may wish to know if the company continued to
                          order goods after it had ceased trading.)
                       2. When did the directors first realise the company was insolvent? (This is probably the most important
                          question to ask. If a director openly admits that his company was hopelessly insolvent, say 6 months
                          ago, and continued to purchase supplies from creditors, then he may be sued personally for Reckless
                       3. Provide details of all major payments made in the past three months? (A creditor may wish to
                          determine if other creditors received “preferential” payments”.)
                       4. When was the last set of audited accounts prepared? (A creditor may wish to assess if the directors
                          acted “responsibly” by maintaining regular accounts.)
                       5. Did the bank have personal guarantees as security for the company's lending?
                       6. Who owns the building that the company operated from?
                       7. Will the directors continue the business through another company? (A creditor may wish to “black list”
                          any new company that the directors become associated with!)
                     Specific questions may also be asked on the statement of affairs presented to the meeting. Creditors
                     attending the meeting may have copies of the last set of accounts filed at the Companies Registration
                     Office, and they may ask questions based on these accounts.

                                                                                       The Institute of Certified Public Accountants in Ireland

                                                                                  Written by Tom Murray, Partner, Friel Stafford Corporate Recovery –
                                                                                  a specialist corporate recovery and insolvency practice.

         Disclaimer                                                                 For further assistance…
         This information bulletin is intended to be used as a guide.               Please contact the Institute of Certified Public Accountants in Ireland
         For further information you should speak to your CPA                       at 01 4251000, who can put you in touch with your nearest CPA
         professional advisor. Neither the Institute of Certified Public            practice. The Institute is a statutory accountancy body with over 5,000
         Accountants in Ireland, or the Small Firms Association can
         be held liable for any error, or for the consequences of any               members and students. CPAs work both in practice, in all areas of
         action, or lack of action arising from this bulletin.                      Irish commercial life, and work in 28 countries around the world.

To top