3 minute read 7 Apr 2021
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Dissolution, voluntary liquidation, radiation: bad words – good opportunities.

By Christophe Vandendorpe

Leader, Strategy and Transactions, EY Luxembourg

Trusted transaction advisor for M&A, due diligence, valuations, legal entity rationalization. Team player. Results-oriented.

3 minute read 7 Apr 2021
Related topics Financial Services

Business leaders tend to freeze once they hear one of these words

However, they are not as cold as current times where we long for sunny days to return, especially with us still facing confinement in one way or another. Grab a coffee, get cozy and let’s dive within the warmer world of liquidation!

Really? In which situation a voluntary liquidation would be good for me?

A variety of situations could bring you to conclude that liquidation is the next step. The need to focus on a profitable business and closing the less profitable one, the sweet sound of retirement approaching, or that the purpose of your business set-up has been achieved and needs to be closed.

All these situations have one common factor, the company has to transition from a state of “being in business” to a state of “winding-up the business”. During this last chapter of the company´s life, the main concern is to bring it to an end considering all stakeholder’ interests.

What are the steps involved?

The board of directors may convene an extraordinary general meeting of shareholders to resolve that the company be placed into liquidation and to appoint a liquidator who will be authorised with the broadest powers available.

Once appointed, the liquidator will take over the control of the company and complete every step of the liquidation from start to finish.

The pre-approval of the relevant regulator, for instance, the CSSF, is required for regulated entities before they are placed into voluntary liquidation and the proposed liquidator may advise on this.

Who should I consider as liquidator? What are his main responsibilities?

A liquidator needs to act in the best interests of the company’s investors, and generally also considers other stakeholders . He or she must assume control of the company´s affairs, realise its assets, ensure creditors are paid, and report to stakeholders concerning the liquidation progress.

The liquidator checks that the company remains solvent throughout the liquidation and any surplus proceeds of the liquidation are distributed to shareholders.

The liquidator faces a myriad of business, accounting and regulatory issues and therefore must have the necessary expertise and knowledge of applicable legislation and procedures in a liquidation.  There is no specific accreditation required for being a liquidator, except for regulated companies where the regulator considers the experience and expertise of an external liquidator. The appointment of a liquidator lacking such experience and expertise may entail legal, regulatory and reputational risks, as well as lead to an extended liquidation period, incurring unnecessary costs and delays in returning capital to investors.

Existing management´s attention is frequently more valuably directed towards starting up new projects, rather than liquidating the business properly, so it makes sense to involve an external liquidator who is experienced at completing such tasks.

To circle back to our introduction and conclude, appointing an experienced liquidator will allow you to enjoy the forthcoming sunny days even more.

This article is brought to you by Christophe Vandendorpe and Regis Leininger who are restructuring and liquidation practitioners at EY Luxembourg´s Reshaping Results team.

Disclaimer - this article is for information only and is not meant to provide legal advice.

This article was originally published in luxtimes.lu

Summary

An article by Christophe Vandendorpe and Regis Leininger who are restructuring and liquidation practitioners at EY Luxembourg´s Reshaping Results team.

About this article

By Christophe Vandendorpe

Leader, Strategy and Transactions, EY Luxembourg

Trusted transaction advisor for M&A, due diligence, valuations, legal entity rationalization. Team player. Results-oriented.

Related topics Financial Services