What have MVLs and Administrations got in common from a
reporting perspective? Quite simply, if
you have not closed the case by the date that triggers the requirement to issue
a progress report, then the legislation requires you to prepare one, even if
you have started the closure process. Contrast that to the treatment in CVLs,
where as long as you issue a draft final report before the anniversary date,
you do not have to issue the progress report at all.
Dealing with Administrations first, rule 2.47 sets out
the reporting requirements and makes it clear that a progress report is
required for each 6 month reporting period up until the Administrator ceases to
act, albeit that you then have 1 month to issue it. You need to bear that requirement in mind
when deciding when to bring an Administration to an end, as not having ceased
to act by a 6 month reporting date means that you will need to prepare a
progress report to that reporting date.
The same issue arises when the Administration has been
extended, and this is the area that we most often see this cause problems. Rule 2.47(3B) says that where you have issued
a report to extend an administration, the period end in that report starts your
next 6 month reporting period. Since you
will usually be seeking a six or 12 month extension and you have to ask before
the period expires, that always means that there will be a progress report due
just before expiry of the extension. So,
if you do not close the case early enough before the end of the extension you
will have to issue both a progress report and also a final report for the
period to closure, including a short period from the progress report end date
to the final closure date.
The problem is that you are often not in control of the
timing of the ending of the Administration, unless it comes to an end
automatically by effluxion of time. Where
you exit by way of conversion to CVL (para 83) you are entirely dependent upon
the timing of the registration of the notice of move to CVL by Companies House. Since that can take several days, you need to
factor in that delay when deciding upon the timing of the exit, sending the
notice sufficiently in advance of the 6 month reporting date to ensure that
Companies House register it before that date.
Similar considerations apply when you exit by way of dissolution
(para 84), or by way of a couple of less common routes, namely by giving notice
that you have achieved the purpose of the Administration (para 80), or by way
of Court Order (para 79). In the first
two you are dependent upon the timing of the registration of the notice by
Companies House in the same way as when moving to CVL, whilst in the latter you
are dependent upon the hearing date set by the Court, which could still end up
being adjourned in any event.
In MVLs section 92A requires a progress report to be
prepared if the liquidation continues for more than 1 year, and rule 4.49C(7)
gives the liquidator 2 months to issue it.
If the liquidator is still in office as at the anniversary of their
appointment they will need to issue one.
The requirement for a liquidator to issue an annual progress report ends
when they cease to act, which on closure of the case will be when the final
meeting has been held and a Form 4.71 has been sent to Companies House (section
171(6)). So even if the notice of the
final meeting is issued prior to the anniversary date, then where the meeting
is not actually held until after the anniversary date there will still be a
requirement to issue an annual progress report.
As a result, you need to take into account the anniversary date of your
appointment when setting the date of the final meeting in order to avoid having
to prepare an additional report.
These comments in respect of MVLs will definitely apply
where the date of commencement of the liquidation and the date of appointment
of the liquidator are one and the same, which is the most common situation, and
also where the liquidator is removed or replaced, say by way of a block
transfer, once the first anniversary of the liquidation has passed. However, where the liquidator is removed
during the course of the first year of the liquidation then the position is
less certain in view of the imprecise wording of the legislation and the
conflicting guidance received from the Insolvency Service, such that it is
uncertain as to whether it is the date of the liquidation or the date of the
liquidator’s appointment that is the key date by which the final meeting has to
have been held. We have previously
Blogged about this and you can read the most recent article by clicking here.
In summary, therefore, whenever you are planning the
closure of an Administration or MVL, you should try to make sure it is closed
before the progress report period end to avoid having to produce the progress
report and a more complicated final report with additional short period disclosure.
Remember that in Administration, that may mean allowing extra time for the
Court or Companies House to conclude their part of the process.
