When a company is placed into a solvent liquidation, the directors are required to make a statutory declaration stating that the company will be able to pay its debts together with statutory interest within 12 months of the liquidation.

It has been widely accepted practice that some creditor claims may take longer than 12 months to pay if, for example, the claim was disputed or an asset needed to be realized in order to make distributions to creditors and shareholders.

In the recent High Court decision in NOAL SCSp & Ors v Novalpina Capital LLP & Ors., the court held that it was a strict requirement that a company should pay all of its debts within the 12 month deadline. The court stated that if a company cannot pay all its debts (including interest) in full within 12-months of winding up, the liquidation must be converted to a Creditors’ Voluntary Liquidation even if the company has sufficient funds to pay all of its debts in due course.

This case has significant implications for any of your clients considering a solvent liquidation as the company needs to be able to pay all of its debts within 12 months and funds may need to be made available in order to achieve this objective. The above case is subject to appeal and the various Insolvency Regulators are seeking urgent clarification from the Government on this matter.