Declaration of Solvency - Members Liquidation

Declaration of solvency

In a members voluntary winding up of a company, a declaration of solvency (Form 12/E1) must be delivered to the CRO pursuant to section 256 Companies Act 1963 as amended by section 128 Companies Act 1990. The declaration of solvency is ineffective unless it is made within 28 days immediately preceding the date of passing of the resolution for winding up the company.

It should not be submitted later than the resolution to wind up, which itself should be submitted to the registrar within 15 days of being passed.

E1 - Form 12 (0.08 MB, MS Word)

Precheck the form

The Form 12 (E1) has a checklist on the front which should be completed by the individual presenting the form to the CRO. The form can also be prechecked in the Public Office of the CRO between 10am and 12.30pm and between 2.30pm and 4.30pm. The form 12 can alternatively be posted to the Carlow address. It is important to complete the form correctly as an ineffective form 12 will result in the company having to apply to the High Court for directions if incorrect.

Check and make sure that:

The form must be completed by all or a majority of the directors
The names and residential addresses of these directors must be stated
The declaration requires the original signatures of the directors
If the company has changed its name within the twelve months immediately preceding the liquidation, then the former name of the company must be included - section 23(6) Companies Act 1963.
The form can be sworn before a Commissioner for Oaths, Peace Commissioner, Notary Public or practising solicitor.
The Place where the swearing took place must be stated on the form.
The Statement of Assets and Liabilities is made at the latest practicable date before the making of the declaration, and in any event not more than three months before the making of the declaration, marked with the letter A and embodied in the declaration of solvency.
The Statement of Assets and Liabilities bears the original signature of each of the directors making the declaration. If the directors have not signed the Statement of Assets and Liabilities, then the declaration is ineffective.
If the Statement is not in the Euro currency, then the currency should be cleared displayed, indicating that it is in dollars, sterling etc.
Form 12(E1) must include the report of the independent person. (Part B). Many people sign Part B but fail to include the actual report. The report itself is needed.
Form 12(E1) must embody a statement by an independent person that he/she has given and not withdrawn his/her written consent to the issue of the declaration with the report attached thereto. (Part C).
If a declaration is sworn abroad, then further authentication may be required. Please see Statutory Declaration Page for more information.
The declaration is required to be completed before the passing of the resolution, so if both are being completed on the same date, the times should be placed on both forms, so as to indicate that the declaration of solvency was sworn prior to the passing of the resolution to wind up.
The declaration of solvency is made within the 28 days immediately preceding the date of passing of the resolution for winding up the company

Report of the Independent Person

An Independent Person is a person qualified at the time of the report to be appointed, or to continue to be, auditor of the company.

A declaration of solvency must have the following attached:

A report by an independent person made in accordance with section 256(4) Companies Act 1963 marked with the letter"B", and signed by the independent person;
The report must state whether, in the opinion of the independent person and to the best of their information and according to the explanations given to them- ( a ) the opinion of the directors referred to in the declaration, and ( b ) the statement of the company's assets and liabilities embodied in the said declaration, are both reasonable.
A statement by the independent person, marked with the letter "C", that he/she has given and not withdrawn his/her written consent to the issue of the declaration with the report attached. This statement must bear the original signature of the independent person.

Ineffective Declarations

If the declaration of solvency is not made and delivered in accordance with section 256 Companies Act 1963, as substituted by section 128 the 1990 Act, it is ineffective and the winding up then becomes a creditors voluntary winding up. Section 266 Companies Act 1963 then applies. Even a technical breach will render the declaration of solvency ineffective.

However, it would not be possible for a liquidator in such circumstances to comply with the provisions of section 266 of the Act, which requires that a meeting of the creditors be called at least ten days before the date of the meeting of the company and that it be held on the same day or the day after the meeting of the company at which the resolution to wind up is passed.

Frequently, an application to the High Court pursuant to section 280 Companies Act 1963 is pursued, in order to annul the resolution and to wind up the company, so that the section 256 procedure can be employed again and a members voluntary winding up brought into being.

Therefore, it is of utmost importance that the declaration of solvency is thoroughly checked as regards signatures, dates and compliance with the provisions of the Companies Acts, before submitting for registration in the CRO.

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