Declaration of Solvency - Members Liquidation

Declaration of solvency: In a members voluntary winding up of a company, a declaration of solvency (Form E1-SAP/E1-41) must be delivered to the CRO pursuant to section 207/579 Companies Act 2014 or section 580 Companies Act 2014. 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.

Under section 207, the declaration must be submitted not less than 21 days after the passing of the resolution.
Under section 580, the declaration must be submitted not less than 14 days after the passing of the resolution.

Precheck the form
The Form (E1-SAP/E1-41) 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 can alternatively be posted to the Carlow address. It is important to complete the form correctly as an ineffective form 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 595 Companies Act 2014.
  • The Statement of Total 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 and embodied in the declaration of solvency.
  • 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 (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.
  • 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 30 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 207 Companies Act 2014 marked with the letter"B", and signed by the independent person;

Section 207: A declaration pursuant to section 207 of the Act of 2014 shall have no effect for the purposes of the Act of 2014 unless it is:
(i) accompanied by a report that contains, at least, relevant information in accordance with the headings set out below, and
(ii) drawn up by a person who is qualified at the time of making the report to be appointed, or continue to be, the statutory auditor of the company.

The report shall be addressed to the declarant company and shall contain, at least, the following information:
I. Introductory paragraph identifying the directors’ declaration and accompanying documents to which the report relates;
II. Statement on the responsibilities of directors;
III. Statement on the responsibilities of statutory auditor;
IV. Scope of work performed by statutory auditor;
V. Other relevant facts (if any) that the statutory auditor has relied on in reaching his/her opinion that the declaration is not unreasonable;
VI. The opinion of the statutory auditor that the declaration pursuant to section 207 is not unreasonable (insert appropriate section reference to report); and
VII. Date and signature of statutory auditor, who having compiled the report, has formed the opinion that the declaration pursuant to section 207 is not unreasonable.

Ineffective Declarations
If the declaration of solvency is not made and delivered in accordance with section 207/580 Companies Act 2014, it is ineffective and the winding up then becomes a creditors voluntary winding up. Section 586 Companies Act 2014 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 587 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 631 Companies Act 2014 is pursued, in order to annul the resolution and to wind up the company, so that the SAP 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 Act, before submitting for registration in the CRO.