The Compendium

They must swear they have made a full enquiry and are of the opinion that the company can pay all of its debts (including taxes and interest) within 12 months from the date the declaration was sworn.

This declaration must be made by ‘all’ of the directors, if there are one or two of them, and by a majority of directors if there are more than two directors on the Register of Directors.

There are potentially criminal implications for directors who swear the declaration of solvency in order to avoid ending the company by way of a Creditors’ Voluntary Liquidation (CVL), where they would be investigated under Statement of Insolvency Practice 2 (SIP 2) and reported upon by the officeholder in an online Directors Conduct Report.

To wrongly swear the declaration could place the directors in contempt of court, and/or potentially make them ‘delinquent directors’ under sections 218 and 219 Insolvency Act 1986.

[See ‘Insolvency Act’, ‘Members’ Voluntary Liquidation’, ‘MVL’, ‘Creditors’ Voluntary Liquidation’, ‘CVL’, ‘Statement of Insolvency Practice’, ‘SIP’ and ‘Directors Conduct Report’.]

Deemed Consent

Deemed consent is a process by which an insolvency officeholder can seek a decision by creditors in insolvency proceedings which does not require them to vote on the proposed decision. It is mechanism by which decisions are approved.

In this procedure, the officeholder sends a notice specifying that the deemed consent procedure is being followed, and giving directions for how to object to the decision. The issue will be deemed to have been accepted as if it were voted through in the qualifying decision-making procedure, unless the requisite number of creditors/contributories object.

The decision will be deemed to have been made will be deemed to have been made if less than 10% of creditors in value object to the proposed decision.

Deemed consent is not a qualifying decision procedure, and therefore, cannot be used in all situations in which a decision is required.