Contents
 Back
to top
Introduction
This booklet is
a guide to winding
up, your limited
liability partnership
or removing it from
the register. The
booklet summarises
some of the rules
that apply to voluntary
arrangements, administration
orders, receivers,
and voluntary and
compulsory liquidations.
It also covers how
and why limited
liability partnerships
are struck off and
dissolved.
This booklet also
covers how, in certain
circumstances, your
limited liability
partnership may
be restored to the
register.
Please remember
that if your limited
liability partnership
is considering liquidation,
or any other measures
to deal with insolvency,
you should seek
appropriate professional
advice or consult
an authorised insolvency
practitioner.
You will find the
relevant law in
the Limited Liability
Partnerships Act
2000, the Insolvency
Rules (Scotland)
1986, and in the
Limited Liability
Partnerships (Scotland)
Regulations 2001
which apply parts
of the Companies
Act 1985 (as amended
in 1989 and later)
and the Insolvency
Act 1986 to limited
liability partnerships.
Back
to top
CHAPTER 1
General insolvency
information
1. What
are insolvency proceedings?
These are formal
measures to deal
with debts of limited
liability partnerships.
Many different types
of insolvency proceedings
apply to limited
liability partnerships.
All are covered
in this booklet.
2. Do all
limited liability
partnerships have
to go through insolvency
proceedings before
being dissolved?
No. If the Registrar
has reason to believe
that a limited liability
partnership is not
carrying on business
or is not in operation,
he may strike its
name off the register
and dissolve it
without going through
liquidation. A limited
liability partnership
that is not trading
may apply to the
Registrar to be
struck off the register.
This procedure
is not an alternative
to formal insolvency
proceedings.
More information
about striking off
and dissolution
of a limited liability
partnership is given
in chapter
7 of this booklet.
3. Can anyone
supervise insolvency
procedures?
All liquidators,
administrators,
administrative receivers
and supervisors
taking office on
or after 29 December
1986 must be authorised
insolvency practitioners.
Receiver managers
and Law of Property
Act (LPA) receivers
do not have to be
authorised.
Insolvency practitioners
may be authorised
by:
- the Chartered
Association of
Certified Accountants;
- the Insolvency
Practitioners'
Association;
- the Institute
of Chartered Accountants
in England and
Wales;
- the Institute
of Chartered Accountants
in Ireland;
- the Institute
of Chartered Accountants
in Scotland;
- the Law Society;
- the Law Society
of Scotland; or
- the Secretary
of State for Trade
and Industry.
4.
What happens to
the members of an
insolvent limited
liability partnership?
The liquidator,
administrative receiver,
administrator or
Official Receiver
has a duty to send
the Secretary of
State a report on
the conduct of all
members who were
in office in the
last three years
of the limited liability
partnership's trading.
The Secretary of
State has to decide
whether it is in
the public interest
to seek a disqualification
order against a
member.
Examples of the
most commonly reported
conduct might include:
- continuing
to trade when
the limited liability
partnership was
insolvent;
- failing to keep
proper accounting
records;
- failing to
prepare and file
accounts or make
returns to Companies
House; and
- failing to
send in returns
or pay to the
Crown any tax
that is due.
Back
to top
CHAPTER 2
Voluntary arrangements
1. What
is a voluntary arrangement?
A voluntary arrangement
is when a limited
liability partnership
makes an agreement
with its creditors
by proposing a 'composition
in satisfaction
of its debt' or
a 'scheme of arrangement
of its affairs'.
This means an arrangement,
approved by the
court, in which
the limited liability
partnership has
formally agreed
terms with its creditors
for the settlement
of its debts.
2. Who may
propose a voluntary
arrangement?
A voluntary arrangement
may be proposed
by:
- the administrator,
if there is an
administration
order;
- the liquidator,
if the limited
liability partnership
is being wound
up; or
- the limited
liability partnership,
in other circumstances.
3.
Who considers the
proposal?
When the limited
liability partnership
has proposed the
arrangement, the
nominee appointed
to supervise its
implementation reports
to the court within
28 days on whether,
in his or her opinion,
a meeting of the
creditors should
be called.
When the administrator
or liquidator proposes
the agreement, the
nominee reports
on whether a meeting
of the members and
a meeting of the
creditors of the
limited liability
partnership should
be called.
4.
How is a proposed
voluntary arrangement
approved?
The meeting(s) summoned
by the nominee decide
whether to approve
the voluntary arrangement
which, subject to
certain restrictions,
may be approved
with or without
modifications. Any
modifications must
be agreed with the
limited liability
partnership. It
is then binding
on all creditors
who had notice of
the meeting and
were entitled to
vote. All creditors
who had notice of
the meeting are
bound by the terms
of the arrangement.
5. What
happens when the
arrangement is approved?
If the meeting of
creditors and the
meeting of members
(in circumstances
where a members
meeting was held)
approve a voluntary
arrangement, then
the nominee or his
replacement becomes
the supervisor of
the arrangement.
6. What
needs to be sent
to Companies House?
The supervisor must
send a copy of the
chairman's report
of the meeting.
At least once every
12 months, the supervisor
must send an account
of receipts and
payments, together
with a progress
report, to all interested
parties including
the Registrar.
When the arrangement
is completed, the
supervisor must
notify the Registrar,
within 28 days after
final completion.
If the arrangement
is suspended or
revoked, the Registrar
must be notified.
The appropriate
forms are:
| Form
title |
Number |
| Notice of
report of a
meeting approving
a voluntary
arrangement
|
1.1(Scot) |
| Notice of
order of revocation
or suspension
of voluntary
arrangement |
1.2(Scot) |
| Notice of
voluntary arrangement's
supervisor's
abstract of
receipts and
payments |
1.3(Scot) |
| Notice of
completion of
voluntary arrangement
|
1.4(Scot) |
Back
to top
CHAPTER 3
Administration orders
1.
What is an administration
order?
It is a court order
made to appoint an
administrator to manage
the limited liability
partnership's affairs.
2.
What is the purpose
of an administration
order?
Its purpose may be
to:
- save the whole
or any part of
the limited liability
partnership as
a going concern;
or
- approve a limited
liability partnerships
voluntary arrangement;
or
- sanction (agree
to) a compromise
or arrangement;
or
- get a better
price for the
limited liability
partnership's
assets or otherwise
realise their
value more favourably
than in a winding-up.
3.
When may a court
make an administration
order?
A court may make
an administration
order when the limited
liability partnership
is, or is likely
to become, unable
to pay its debts
and the court considers
that the making
of an administration
order could achieve
one of the purposes
outlined above.
4. Who may
make a petition
for an administration
order?
This may be done
by the limited liability
partnership itself,
or one or more of
its creditors including
any contingent (existing)
or prospective creditors.
The administrator
appointed by the
order must notify
the Registrar of
the order.
5. What
is the effect of
the order?
While an administration
order is in force,
the limited liability
partnership cannot
be wound up and
an administrative
receiver cannot
be appointed or,
if previously appointed,
they must vacate
office. There are
restrictions on
enforcing any security
over the limited
liability partnership's
property, selling
any goods and starting
any legal proceedings.
More details about
receivers are given
in chapter
4.
6. Who must
an administrator
notify of his or
her appointment?
An administrator
must:
-
Advertise the
order in the
Edinburgh
Gazette
and in a newspaper
in the area
where the limited
liability partnership
has its principal
place of business;
and
- send a copy
of the court order
to the Registrar
with Form 2.2(Scot).
What
is the Edinburgh
Gazette?
The Gazette
is published
by The Stationery
Office and
contains various
statutory
notices and
advertisements.
It is published
twice weekly
and can be
obtained from
The Stationery
Office, 73
Lothian Road,
Edinburgh
EH3 9AW. |
7. What
are the administrator's
duties?
The administrator
takes control of
all the property
to which the limited
liability partnership
is, or appears to
be, entitled. He
or she prepares
proposals for achieving
the purpose for
which the administration
order was made and
calls a meeting
of creditors to
consider those proposals.
If the majority
of creditors approve
the proposals, the
administrator then
manages the affairs,
business and property
of the limited liability
partnership in accordance
with the proposals.
8. Does
the administrator
need to send anything
else to Companies
House?
Yes. The administrator
must send details
of the proposals
within three months
after the order
was made.
Then, every six
months, the administrator
must send an account
of receipts and
payments.
9. How long
does an administration
order last?
It continues until
the court discharges
it - in other words,
decides that the
order is no longer
needed.
If there is a court
order to discharge
the order, or to
vary its terms,
the administrator
must send a copy
to the Registrar
within 14 days after
the order was made.
10. Which
forms should be
used?
The appropriate
forms are:
| Form
title |
Number |
| Notice of
petition for
administration
order |
2.1(Scot) |
| Notice of
administration
order |
2.2(Scot) |
| Notice of
discharge of
administration
order |
2.4(Scot) |
| Notice of
statement of
administrator's
proposals |
2.7(Scot) |
| Notice of
result of meeting
of creditors
|
2.8(Scot) |
| Administrator's
abstract of
receipts and
payments |
2.9(Scot) |
| Notice of
variation of
administration
order |
2.12(Scot) |
Back
to top
CHAPTER 4
Receivers
1. What
is a receiver?
Appointed by or
on behalf of the
holder of a floating
charge, a receiver
has the power to
sell or otherwise
realise the charged
assets of the limited
liability partnership
in an attempt to
repay the debt owed
to the charge-holder.
2. Who tells
the Registrar and
Accountant in Bankruptcy
(AIB) that a receiver
has been appointed
?
Within seven days
of the appointment,
the person who appoints
the receiver must
deliver notice to
the Registrar and
AIB. When the receiver
ceases to act, the
holder of the floating
charge must deliver
notice to the Registrar
and AIB within 14
days.
3. What
document must the
receiver send?
Within three months
of his appointment,
the receiver must
deliver a report
to the AIB with
copies to:
- the limited
liability partnership's
creditors;
- the holders
of a floating
charge; and
- any trustees
for secured creditors
of the limited
liability partnership.
The report must:
Statement
of affairs
This is a
summary of
the limited
liability
partnership's
assets, liabilities
and creditors.
The administrative
receiver decides
whether it
is required
and who should
prepare it.
|
Within two months
of the anniversary
of the appointment,
the receiver must
send the AIB an
account of receipts
and payments covering
the first 12 months
of receivership
and for every 12
months thereafter.
4. Which
forms should be
used?
The appropriate
forms are:
| Form
title |
Number |
| Notice of
the appointment
of receiver
by a holder
of a floating
charge |
1
(Scot) |
| Notice of
the appointment
of a receiver
by the court |
2
(Scot) |
| Notice of
the receiver
ceasing to act
or of his removal |
3
(Scot) |
| Receiver's
abstract of
receipts and
payments |
3.2
(Scot) |
| Notice of
receiver's report
|
3.5
(Scot) |
Back
to top
CHAPTER 5
Voluntary liquidation
There are two kinds
of voluntary liquidation:
-
members' voluntary
liquidation
(MVL) - which
means the designated
members have
made a statutory
declaration
of solvency;
-
creditors' voluntary
liquidation
(CVL) - which
means the designated
members have
not made such
a declaration.
1.
When can a limited
liability partnership
go into MVL?
This can take place
when the designated
members of a limited
liability partnership
believe that the
limited liability
partnership is solvent.
A majority
of the limited
liability
partnership's
designated
members must
make a statutory
declaration
of solvency
in the five
weeks before
the date when
the limited
liability
partnership
determined
that it would
be wound up,
or on the
date but before
making the
determination
- see question
3. |
2. What
is in the declaration?
The statutory declaration
will state that
the designated members
have made a full
inquiry into the
limited liability
partnership's affairs
and that, having
done so, they believe
that it will be
able to pay its
debts in full within
12 months from the
start of the winding-up.
The declaration
will include a statement
of the limited liability
partnership's assets
and liabilities
as at the latest
practicable date
before making the
declaration.
3.
When does liquidation
actually start?
The liquidation
starts when the
members determine
to wind up the limited
liability partnership.
The means of making
such a determination
will usually be
provided for in
the partnership
agreement. In the
absence of any provision,
the determination
will be made by
a decision of the
majority of members.
4. Must
notice of voluntary
liquidation be given
to anyone?
Yes. Notice of the
determination for
voluntary winding-up
of the limited liability
partnership must
be published in
the Edinburgh
Gazette within
14 days of the making
of the determination.
The limited liability
partnership must
also send a copy
of the declaration
and the determination
to AIB and a copy
of the determination
to the Registrar
within 15 days of
the date when the
limited liability
partnership determined
that it would be
wound up.
5. When
may a CVL be appropriate?
A limited liability
partnership may
go into CVL when
it cannot pay its
debts.
6. What
must the limited
liability partnership
do?
Its members determine
that the limited
liability partnership
cannot continue
in business because
of its liabilities
and that it is advisable
to wind up. The
way in which the
limited liability
partnership makes
such a determination
will usually be
provided for in
the partnership
agreement. In the
absence of any provision,
the determination
will be made by
a decision of the
majority of members.
The determination
must be:
- advertised
in the Edinburgh
Gazette within
14 days; and
- sent to the
Registrar and
AIB within 15
days.
A
meeting of creditors
must be held in
the next 14 days
after the determination
to wind up has been
made. Notice of
the meeting must
be sent to the creditors
at least seven days
before the meeting.
Also, the designated
members must prepare
a statement of affairs
for consideration
at the meeting,
and appoint one
of themselves to
attend and preside
over the meeting.
When the liquidator
is appointed, the
designated members
must provide him
or her with a statement
of affairs and otherwise
co-operate with
the liquidator.
7. Does
the limited liability
partnership have
to advertise notice
of the meeting?
Yes. The meeting
must be advertised
in the Edinburgh
Gazette and
in two newspapers
in the area where
the limited liability
partnership has
its principal place
of business.
8. What
are the main duties
of a liquidator?
The liquidator is
appointed to wind
up the limited liability
partnership's affairs.
The liquidator does
this by calling
in all the limited
liability partnership's
assets and distributing
them to its creditors.
If anything is left
over, the liquidator
distributes it among
the members of the
limited liability
partnership.
9. Does
a liqu | 
