Disclosing dividends and distributions to members in final receipts and payments accounts

The 2010 rule changes included some specific and detailed requirements as to content in final receipts and payments accounts issued in liquidations.  Unlike the SIPs, where the required information can be included in the report or the receipts and payments account, the information required by the rules must appear in the receipts and payments account itself.  Most of the information should be automatically included from the case management system, but the areas where we find that liquidators have most problem with are including the required information about dividends to creditors and distributions to members.

In summary the requirements for CVLs, as set out in rule 4.126(1E)(a) are to show:

(xii) the aggregate numbers of preferential and unsecured creditors;
(xii) the aggregate amounts paid to preferential and unsecured creditors set out separately unless all creditors have been paid in full; 
(xiii) statements of the aggregate dividend paid to preferential and unsecured creditors  expressed as xp per £, and of the estimate of the net property originally disclosed to creditors in the report issued after the section 98 meeting;
(xiv) the amount of statutory interest paid;
(xv) the amount paid to members in respect of each class of share, setting out the amount per share and the nominal value of each class of share.

A client has contacted Turnkey to see how they can include this information, particularly in respect of the numbers of preferential and unsecured creditors in (xii), the p in £ amounts in (xiii) and the amount per share and the nominal value of each class of share in (xv), and the client has agreed that we can share their response with you.  Turnkey have indicated that there are two ways of including the information. 

The first, to make the information appear in the body of the receipts and payments account, involves editing the specific lines in the Chart of Accounts dealing with payments to creditors and members before preparing the final receipts and payments accounts.  However, that could be quite fiddly and time consuming.  

The second, to include the information by way of note to the account, involves creating a note template.  We believe that such an approach is compliant since the information still appears in the account itself.  The note template should be added to a case where a distribution has been made at the time that the final report is being prepared.  For instance, the note template covering dividends to creditors could read: 

“Dividend information:

xx preferential creditors paid at xxp in £

xx ordinary creditors paid at xxp in £

Estimate of the net property of the company disclosed to creditors after the section 98 meeting £x”

and for distributions to members:

“Distribution to members information:

A class £#/#p ordinary shares paid at ##p per share

B class £#/#p ordinary shares paid at ##p per share”

That note could then be embedded in the final receipts and payments account as a note to the account.

Don’t forget that the information about the aggregate numbers of preferential and unsecured creditors must always be included in the final receipts and payments account irrespective of whether or not any dividend is paid to them (rule 4.126(1E)(a)(xii)).

Expanding on the original query, on the rare occasion when you have a CVL where everyone is paid in full and you pay some statutory interest, a similar embedded-note approach could be used to make the disclosure required by rule 4.126(1E)(a)(xiv).

Finally, there are separate disclosure requirements for final receipts and payments accounts in MVLs under rule 4.126A(4)(a), but a similar approach can be taken to make the necessary disclosure and to show:

(xii) the aggregate amount paid out to creditors;
(xiii) the amount of statutory interest paid; 
(xiv) the amount paid to members in respect of each class of share, setting out the amount per share and the nominal value of each share in each class.

Postscript added 25 February:

Rules 4.126(1E) and 4.126A set out specific requirements as to the contents of final receipts and payments accounts in liquidations, but make it clear that an entry is not required where the amount for an item is zero.  For example, under rule 4.126(1E)(a)(ii) if no solicitor was employed in the liquidation then the final receipts and payments in a CVL or compulsory liquidation need not contain a line for “costs of employing a solicitor” since the amount for that entry would be £nil.  However, there is a problem in that there are two different interpretations of rule 4.126(1E)(a)(xii), which requires the disclosure of “the aggregate numbers of preferential and unsecured creditors and the aggregate amounts paid out to them ….”  This could either mean that disclosure of the information is only required about both the numbers of creditors and the amounts paid to them in cases where a dividend is paid; or that the numbers of creditors needs to be disclosed in all cases, with additional information about amounts paid to them in cases where a dividend is paid.  It is unlikely that the meaning of this rule will ever be considered in Court to give a definitive answer, nor do we expect the regulators to raise particular concerns about the interpretation of the rule.  Clearly though, the risk averse approach would be to include a note as to the number of preferential and unsecured creditors in all cases.