Pearl Wright
Company & Commercial
What is Dissolution and Voluntary Liquidation?
Top Gear and Grand Tour hosts Clarkson, May and Hammond dissolve production company.
Top Gear and Grand Tour hosts Clarkson, May and Hammond dissolve production company.
After 21 years together Jeremy Clarkson, Richard Hammond and James May look to be going their separate ways after they recently took steps towards the dissolution of their production company W. Chump & Sons Limited.
The company that produced Amazon’s the Grand Tour is being solvently wound up with roughly £24 million in assets to be distributed among shareholders.
But what exactly does this mean and what is the process?
Dissolution
Dissolution is the formal process by which a company is legally dissolved and ceases to exist. It can occur after a company has been through liquidation, but it can also happen without a formal liquidation process when that company is dormant and has no assets or liabilities. Once the company is dissolved it will be marked as such on the Companies House register and will no longer be able to legally trade or carry on business.
Voluntary Liquidation
Voluntary liquidation is a process initiated by the shareholders or directors to wind up its affairs. This involves selling off the company’s assets, paying its debts and distributing the remaining assets to the shareholders.
The Process
In order to dissolve a solvent company like in the case of W. Chump & Sons the company must first go through the Voluntary Liquidation Process.
The first step here is for the board of directors to convene a board meeting and determine that the company is solvent and propose to the shareholders a resolution for the shareholders to wind up the company. The board should also nominate a liquidator to handle the process.
The second step is for the directors to make a statutory declaration of solvency, this is typically done by way of a Companies House form LIQ01 whereby the directors confirm that the company is solvent and able to pay its debts where due. This form is then filed with Companies House.
Next the shareholders must pass a special resolution to wind up the company. A special resolution is a resolution requiring 75% of the votes approving the resolution. This can be done by way of written resolution or at a general meeting of the company. If there is a written resolution this will need to be filed by the company and if it is done at a general meeting then confirmation that it was passed at a general meeting must be filed. For fans of the Grand Tour the confirmation of the resolution was signed by Mr Wilman who famously assigns tasks to the trio when off on their adventures. This resolution should also be advertised in The Gazette within 14 days.
The company must then appoint a liquidator, the liquidator’s role will be to collect and realise any assets of the company, to pay off any debts and then ultimately distribute the remaining assets to the shareholders. The liquidator must keep proper records of all transactions and will need to present an account of the entire process to the members at a final meeting of the company.
The final step after this is for notice of the final meeting to be advertised in The Gazette and the final account and return is filed with Companies House. Then after three months, after this return is registered the company will be dissolved.
James Bowles, an Associate Solicitor in the Corporate and Commercial team, said:
‘By following the appropriate steps in a voluntary winding up the members of a solvent company can efficiently wind up its affairs and ensure that all debts are paid, and remaining assets are distributed appropriately before the company is officially dissolved. At Mullis & Peake LLP, we have extensive experience in setting up and advising on the legal aspects of this process. Whether you are considering a voluntary liquidation or need guidance on managing an existing one, our team is here to help.’