In summary, Andorran insolvency is at a crossroads where, on one side, rules that provide for adequate latitude to promptly resolve, reroute, or liquidate insolvency situations with a fairly pleasant starting grid for creditors are at a crossroads. The 1969 Insolvency Decree may have a competitive edge over other jurisdictions, but the lengthy legal processes and the micro-litigation culture that is engrained in the legal actors of the jurisdiction tend to undermine this advantage. As a result, it is unclear where Andorran insolvency rules may go in the future. Enhancing the pro-creditor posture of the law in a jurisdiction lacking a system of particular legal recognition of credits or legal recognition of pre-insolvency or second chance mechanisms would appear to be a suitable course of action for the legislative authorities soon.
Detailed instructions for company liquidation
Suitability
First, the Company’s directors must concur that a voluntary liquidation of the Company is appropriate. The Directors should ascertain for themselves if the Company is solvent to establish appropriateness. The Company must be able to pay its debts in full as they become due for a period of no longer than twelve months to meet the requirements for solvency. It is conceivable for the Company to acquire assistance from another entity(the Investment Manager, for instance), allowing it to pass the solvency test even if it is unable to pay its debts.
Announcement of solvency
It is recommended that the Board of Directors meet to legally record that the Directors have determined that the Company is, in fact, solvent. A Declaration of Solvency will then be signed by the Directors and submitted to the Registrar of Companies.
Special resolution
The voting/management shareholder of the Company shall pass a Special Resolution to:
- Resolve to wind up the Company after the Directors have certified the Company solvent.
- Select a willing liquidator.
- Validate the liquidator’s fees.
Following the approval of the shareholder resolution, the Company will formally enter voluntary liquidation. In other cases, the company that is being liquidated might not have issued any voting or management shares, or the shares might have been bought back. When this occurs, the company prepares the appropriate Board resolution to issue a single voting share to approve the Special Resolution authorizing the Company’s voluntary liquidation.
Liquidator’s approval
A consent form alerting the Registrar of Companies of the appointment will be signed by the liquidator and submitted with it. The Consent will be submitted with the shareholders’ resolution to liquidate voluntarily and a Notice to the Registrar of the liquidation.
Attention to creditors
The Company is then announced to have entered voluntary liquidation through a Notice to Creditors that is published in the Gazette. At this time, the contact information for the liquidator will also be made public, giving potential creditors a chance to lodge any unpaid claims. It might be required in some circumstances to post notices in other countries.
Final general meeting notice
The Gazette will issue a notice of the Company’s Final General Meeting. Creditors are advised to provide the Voluntary Liquidator with proof of any unpaid claims or invoices within the announced Notice Period. The Notice Period typically lasts at least 21 days after the date the Gazette was published. Additionally, the message will feature the date of the final general meeting.
Settlement of claims
The Voluntary Liquidator will verify the legitimacy of any invoices or claims submitted to them. To assess if the claim is legitimate, the Voluntary Liquidator will consult with the Company’s other service providers.
Account and report of the liquidator
A Report and Account of the liquidation process from the moment of official liquidation(Step 3), through the date of the Final General Meeting, as stated in the Notice, will be prepared by the Voluntary Liquidator(Step 6).
General meeting final
On the scheduled date, the Final General Meeting will be placed. The Voluntary Liquidator will present the Report and Account at the meeting for voting/management shareholder approval. Shareholders with voting and management rights may send a proxy to the meeting. Within seven days after the final general meeting, a final notice will be submitted to the registrar of companies.
Take away
Even while most voluntary liquidations take between two and three months, the entire process can be finished in as little as five weeks. The procedure will take a little longer for businesses that are registered as mutual funds.
