This guide identifies the types of voluntary liquidation and outlines the procedure to take in both the British Virgin Islands and Cyprus. It also sets out the duties of a liquidator in the winding-up process.
Cyprus voluntary winding up- two types:
- Members voluntary winding up - a Declaration of Solvency (statement of assets and liabilities) is made prior to the resolution for winding up. This is a solvent liquidation
- Creditors voluntary winding up - there is no Declaration of Solvency and it is an insolvent liquidation
Cyprus members winding up process:
- Company must be in good standing
- Preparation of financial statements submitted to the Registrar of Companies for stamping and signature
- Declaration of solvency-submitted to the Registrar of Companies
- Statement of assets and liabilities
- Special resolution – published in the Gazette
- Appropriate forms completed (HE43, HE41 or HE42)
- Liquidator appointment (publish in Gazette and deliver to the Registrar of Companies)
- Application to Tax Commissioner (and other authorities) for Tax Clearance Certificates
- Liquidator distributes all assets (if any) and Liquidator convenes final meeting (published in Gazette) statement submitted to Registrar of Companies
Cyprus members winding up timeframe:
- The voluntary members winding up of a company may take approximately 6 to 8 months. This varies from case-to-case depending on various aspects, eg. collection of required documents for submission to Registrar, Tax Authorities, etc.
The primary duties of a liquidator in Cyprus
- Take possession of, and protect assets
- Look into the affairs of the company and ascertain whether any misfeasance, fraudulent preference or breach of trust by officers
- Identify all contributories and creditors
- Have disputes adjudicated upon
- Realise assets and apply proceeds in payment of debts and liabilities (including taxes)
- Pay claims/proof of debts (not necessary in involuntary winding up)
- Distribute surplus assets amongst contributories and adjust their rights
- Great care must be taken to correctly assess the financial and legal status of the Company so as to decide what type of voluntary liquidation is appropriate for it under the given circumstances prior to proceeding - solvent or insolvent liquidation?
The BVI liquidation process for a voluntary solvent liquidation
- The company must be in good standing
- Directors and members resolve to liquidate the company and appoint a liquidator
- Company must prepare a plan of liquidation. This requires the company to identify one or more liquidators
- A voluntary liquidator cannot be another company or other body corporate -it must be an individual - but, save for regulated companies, does not have to hold any specific qualifications or be resident in the British Virgin Islands. There are some restrictions on who may be appointed to act as a voluntary liquidator of a company. In particular, an individual, or any person who is a close relative, who is or at any time in the two years prior to commencement of the liquidation has been a director or acted in a senior management position of the company or any affiliate is disqualified from acting as a liquidator (although there is no restriction on an external auditor acting as liquidator)
- The company and members must then formally approve the liquidation plan
- The directors must adopt a solvency declaration that the company can meet its debts as they fall due and that its assets exceed its liabilities and prepare a statement of assets and liabilities
- Once appointed, the voluntary liquidator must advertise the commencement of the liquidation. Broadly, this provides for advertising locally (in the BVI) and in the company’s principal place of business (if that is outside of the BVI) or (if the company has no principal place of business) where the liquidator believes such advertising is most likely to come to the attention of the company’s creditors
- Liquidator distributes the surplus assets (if any)
Upon completion of the liquidation, the liquidator will make filings and publish a notice confirming that the liquidation is complete. The Registrar will then strike the company off the Register of Companies and issue a Certificate of Dissolution. The date of dissolution is significant, since after this date, the company no longer exists, and the company can no longer incur liabilities or sue or be sued
The primary duties of a liquidator in the BVI
- Take possession of, protect and realise all of the company’s assets
- Identify all creditors or claimants
- Pay and discharge all of the company’s obligations and liabilities
- Distribute surplus assets to members
- Prepare statements of account, and, if required by the plan of liquidation, send it to all of the members
BVI solvent voluntary liquidation timeframe
- In most cases, a voluntary liquidation can be completed within 60 days of the date on which each voluntary liquidator is appointed
