Liquidators dragging feet on distribution

[anonpreneur]

Hi all,
As per the title, currently going through an MVL and awaiting the distribution of funds from the liquidators. All of the paperwork has been signed and I have chased them a couple of times, but I am being told that they are waiting for the bank to open an account to move the money into before they can send it on.

Obviously, this could just drag on indefinitely and I am completely at their mercy. I'm aware that complaining too loudly could have an adverse effect, but I am wondering if anyone has found themselves in a similar position, and if so, is there anything you could recommend to move things along?

 

[Lisa Thomas]

Did they undertake to pay a distribution within certain timeframes in their engagement terms? Do they already hold the company's money?

 

[anonpreneur]

Did they undertake to pay a distribution within certain timeframes in their engagement terms? Do they already hold the company's money?

Thanks for responding. Yes, they hold the company's money and the only timeframe I can find a reference to in terms of engagement states:

We will return monies held on the client’s behalf promptly as soon as there is no longer any reason to retain those funds.

 

[Lisa Thomas]

Not sure why they can't just transfer the funds from the account they are holding it. I assume that might be the client account. I can only recommend you phone and speak to the IP to complain about the delay.

 

[Elliot Green]

Hi all,
As per the title, currently going through an MVL and awaiting the distribution of funds from the liquidators. All of the paperwork has been signed and I have chased them a couple of times, but I am being told that they are waiting for the bank to open an account to move the money into before they can send it on.

Obviously, this could just drag on indefinitely and I am completely at their mercy. I'm aware that complaining too loudly could have an adverse effect, but I am wondering if anyone has found themselves in a similar position, and if so, is there anything you could recommend to move things along?

The Liquidator potentially could be at risk in making a distribution prior to obtaining HMRC clearance which can take quite a while. It might be perceived as feet dragging but it is not necessarily so.

 

[Lisa Thomas]

We obtain indemnities to get round this point.

I would expect the Liquidator to have explained there will be months worth of delays to the distribution/s if this is the case for OP.

 

[pentel]

There should be no reason for this delay. I received mine the day after completing the paperwork. I did end up transferring a small amount back to the liquidator to cover a small creditor.

 

[Elliot Green]

We obtain indemnities to get round this point.

I would expect the Liquidator to have explained there will be months worth of delays to the distribution/s if this is the case for OP.

My concern with automatic reliance on indemnities is they do not necessarily cover a Liquidator from suggestions of misfeasance, particularly if the distribution is made before the end of the advertising period. Secondly of course an indemnity is not quite as good as cash.

 

[Frank Wessely]

I usually pay the first capital distribution of 75% - 80% within 3 to 4 weeks of being appointed. The second and final distribution is dependent upon when clearance from HMRC is received which, of course, can be many months. Hearing about delayed distributions or uncommunicative IPs handling MVLs make me slightly nervous, but no doubt there is another side to the story.

 

[Lisa Thomas]

My concern with automatic reliance on indemnities is they do not necessarily cover a Liquidator from suggestions of misfeasance, particularly if the distribution is made before the end of the advertising period. Secondly of course an indemnity is not quite as good as cash.

It's not an automatic reliance. We obviously have the Declaration of Solvency and accounts etc to determine too, although I appreciate they are not a complete guarantee there aren't some creditors out there in the ether somewhere.

I've never heard of a claim of misfeasance against an IP. (Fraud yes, misfeasance, no). Be interested to know more about these types of claims if you have more info? Thanks Elliot.

 

[anonpreneur]

Thanks all for commenting - just a few follow up points:

- Indemnity agreement has been signed.
- I am aware that it's typical to retain 25% of funds for creditors but I reached an agreement with IP for this to be a lesser sum - it is a very simple case with no assets or creditors.
- I'm not sure if HMRC Clearance has been received, but all of the paperwork is live on the companies house website.
- It has been 3 weeks since IP was officially appointed (according to docs on CH.

Having chased again today and expressed the urgency of the situation (I have had no income for several months and was relying on this distribution to pay bills) I have again been advised that there is a delay with opening the bank account and the distribution will be sent as soon as it is possible but there is no timescale on this.

Not sure what action to take from here, should I

- Demand a fixed date?
- Speak to Obudsman? (whoever this is?)

As I said in OP, I'm mindful that going about this in the wrong way could have the adverse affect but I'm also aware that without any sort of action this could just drag on and on.

 

[Lisa Thomas]

I can't see how going about it the wrong way could have an adverse effect.

I still don't understand the issue of the bank account. Either, they already have the funds in a bank account so can send the funds direct, or the bank can be instructed to send funds to your account or their general client account.

 

[Frank Wessely]

I don't understand the issue of the bank account either. It seems that the funds are being held in the liquidator's client account.

Obviously there needs to be a new Estate bank account opened through which the funds must flow but it take us 10 minutes or less to open up a new bank account for a MVL.

 

[Elliot Green]

It's not an automatic reliance. We obviously have the Declaration of Solvency and accounts etc to determine too, although I appreciate they are not a complete guarantee there aren't some creditors out there in the ether somewhere.

I've never heard of a claim of misfeasance against an IP. (Fraud yes, misfeasance, no). Be interested to know more about these types of claims if you have more info? Thanks Elliot.

My concern is also vanishing Directors making the indemnity worthless. Having said that if you wait the 21 days there was case law talked about in the Supreme Court when Sequana was debated that seems to *suggest* you can distribute. This suggests to my mind you shouldn't really need to await HMRC clearance. In any event if you consider the wording of HMRC clearance it does not necessarily appear to amount to an estoppel. An insolvency manager at ICAS I *recall* on linkedin has suggested HMRC clearance might not be required to distribute.

In respect of IP misfesaance not specific to MVLs these two cases are examples of IP breach of duty cases:
-Brewer v Iqbal
-Top Brands v Sharma (212 case)

In an MVL if the IP distributes before the 21 days clears and causes loss to the estate that would appear a breach of duty conceivably.

Disclaimer: no liability accepted for reliance on this post. For information and discussion only. Not legal advice. Not to be relied upon.

 

[Lisa Thomas]

My concern is also vanishing Directors making the indemnity worthless. Having said that if you wait the 21 days there was case law talked about in the Supreme Court when Sequana was debated that seems to *suggest* you can distribute. This suggests to my mind you shouldn't really need to await HMRC clearance. In any event if you consider the wording of HMRC clearance it does not necessarily appear to amount to an estoppel. An insolvency manager at ICAS I *recall* on linkedin has suggested HMRC clearance might not be required to distribute.

In respect of IP misfesaance not specific to MVLs these two cases are examples of IP breach of duty cases:
-Brewer v Iqbal
-Top Brands v Sharma (212 case)

In an MVL if the IP distributes before the 21 days clears and causes loss to the estate that would appear a breach of duty conceivably.

Disclaimer: no liability accepted for reliance on this post. For information and discussion only. Not legal advice. Not to be relied upon.

Thanks Elliot

I've never heard that HMRC clearance was a legal requirement, anyway. I always assumed it was at the IP's discretion.

It's potentially good practice of course, but if you have good communication with the company accountants, recent accounts and the DOS you should have an accurate picture of any HMRC liability before liquidating, (although I appreciate there's no guarantee).

Thanks for the pointers on the two casess. I will check them out.