Appointment Of A Liquidator In A Compulsory Liquidation

Hello and welcome back to this week's blog.

Following on from my recent blog on Compulsory Liquidations I am continuing a deeper look into the issues surrounding the liquidator's appointment.

APPOINTMENT

On the Court making a Winding Up Order against a Company a Government appointed civil servant known as the Official Receiver is immediately appointed Liquidator of that Company.

The main duties of the Official Receiver are said to be to :

• Protect and preserve the assets of the company

• Make enquiries into the company dealings.

• Make a report under the Company Directors Disqualification Act.

PROTECTION AND PRESERVATION OF THE ASSETS

To achieve this duty the Official Receiver, or his agent, will take into his custody and control the various assets of the Company. This usually means that an agent of the Official Receiver will attend at the Company premises, close the business down, dismiss staff and take possession of the assets. The Official Receiver will then collect in the company's debts and sell the company's assets by auction or private treaty.

The Official Receiver will process claims from all of the employees for any arrears due for wages, holiday pay, notice pay and redundancy pay. The Redundancy Payments Office then pays the employees the amounts due to them subject to certain statutory limits.

ENQUIRIES INTO DEALINGS

The Official Receiver then makes Initial enquiries into the dealings of the company by:

• Forwarding an extensive enquiry booklet to the directors for completion.

• Interviewing the directors in connection with that completed booklet.

• Corresponding with company creditors, VAT office, PAYE office, bankers etc.

REPORT UNDER THE COMPANY DIRECTORS DISQUALIFICATION ACT

The Official Receiver has a duty to "report" to The Insolvency Service in relation to the "conduct" of each director.

Guidance notes are issued to the Official Receiver by The Insolvency Service in relation to matters which should be considered in compiling a conduct report.

The aim of such a report is to be objective and fair. If a director of a company is considered to be "unfit" he might be disqualified from acting as a director for a period of between two and fifteen years. There are many pages on this website about the disqualification process, principles and defences to any allegations made of unfitness.

One effect of a disqualification order is that the person involved, if he or she wishes to start up a new business, must do so either as a sole trader or in a partnership. In other words that individual will be personally liable for all future business debts that he incurs. (He does not have the protection of a limited liability company).

NEXT STEP

In some cases where there are realisable assets or complicated investigation/litigation issues, a private insolvency practitioner (IP) will take over the duties of the Official Receiver in relation to the:

• Realisation of assets.

• Agreement of creditors claims.

• Payment of dividends to creditors.

In "small asset" cases the IP appointed may be selected from a rota of IP's.

In larger asset cases the IP is likely to be appointed at a creditors meeting, or at the nomination of the largest creditors via a Secretary of State Appointment.

As always, should you wish to discuss Winding Up Petitions, Compulsory Liquidations or any other insolvency matter in more detail, please do not hesitate to get in contact. Telephone: 01326 340 579, Email: ale@purnells.co.uk