The primary and overriding role of an appointed liquidator, whether appointed in a voluntary or compulsory liquidation, is to protect the interests of creditors. 

Company directors have a duty to co-operate with the Official Receiver or privately appointed liquidators. Under the Insolvency Act 1986, failure to do so could lead to criminal prosecution.

In some cases the company liquidator will be the Official Receiver, appointed by the court, such as with a compulsory liquidation.

In other forms of company closure and liquidation, where an Insolvency Practitioner must be involved, the liquidator can be chosen by the creditors. With voluntary liquidations, the liquidator can be chosen by the company via its directors (although with shareholder approval). 

Whilst liquidators, however appointed, have the same basic duties and role, it is usually the case that a liquidator chosen by directors for a voluntary liquidation process may be less aggressive and hostile than one appointed by creditors in a compulsory liquidation. For example, where a liquidator is chosen by a company’s creditors in a compulsory liquidation to take over from the Official Receiver, this can mean a more aggressive and hostile approach to the company’s directors. 

We are fully licensed Insolvency Practitioners. If you need to appoint a company liquidator, we provide a specialist, experienced service. We work with businesses of all types and sizes but are especially well known for advising small businesses.

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How is a Company Liquidator Appointed?

An insolvency practitioner is appointed at a creditor’s meeting or by the Secretary of State for Business, Innovation and Skills. 

The role of a liquidator becomes officially recognised when appointed by a meeting of creditors; this must be advertised in the Gazette. If the appointment is made by the Secretary of State, each creditor must be informed individually.

What are the Powers and Duties of a Liquidator?

Once appointed, the liquidator is responsible for:

  • Realising the assets of the insolvent company and achieving the best possible price;
  • Address outstanding claims against the limited company and satisfy the claims as set-out by law;
  • Distributing the returns to the company’s creditors in order of priority;
  • Acting in the best interests of the creditors (not the directors).

Maximising the return for creditors

Maximising the return for creditors is the liquidator’s primary responsibility. As part of this duty, they may apply to the court to restore property that has been disposed of in an unfair way. For example, assets may have been sold to a connected business for less than their market value.

Investigating the Possibility of Wrongful or Fraudulent Trading

A liquidator can also take action against current or previous company directors who did not act in the best interests of creditors (Section 214). For example, if the company continued to trade and make further losses after becoming insolvent, the directors can be made personally liable for the debts.

What is a Provisional Liquidator?

Occasionally, when a winding up petition is presented to court, the judge will deem it too risky for the company to continue trading. This may be because the assets are in some way at risk and, in these instances, the court will appoint a provisional liquidator to safeguard the company until the full petition is heard.

This can be done either with or without notice to the the company,

How are Company Liquidators Paid?

A liquidator is paid for the work that they do. Their payment can be in the form of a pre-agreed fixed sum, an hourly rate, or as a percentage of the assets they realise. This payment should be agreed at the creditors meeting or with the creditors’ committee.

The level of payment the liquidator receives should be based on:

• The complexity of the case
• How effectively they carry out their duties
• Any extra responsibility the liquidator takes on
• The value and nature of the assets

A full estimate of the liquidator’s fee should be provided in advance of the work they complete. Their payment claim should be made along with evidence of any expenses and the progress that has been made. There should also be a breakdown of the time spent on the case if the liquidator is receiving an hourly rate. This should be in keeping with the principles set out in The Statement of Insolvency Practice (SIP) 9.

Role of the Liquidator in an Insolvent Liquidation

The role of a liquidator is essentially the same whether the liquidation is a creditors voluntary liquidation or a compulsory liquidation.

On appointment, the liquidator will manage the liquidation process by dealing with creditors and organising creditors meetings where necessary. He or she will sell the company’s assets, and the proceeds will be used to pay creditors after agreed costs and fees have been deducted.

The liquidator will complete and file all the required paperwork. It is also his or her role to investigate the conduct of the company directors for the last three years before the liquidation. He or she has a duty to report any evidence of criminal activity to the relevant authorities.

With a compulsory liquidation, the Official Receiver will be initially appointed by the Court as part of a Winding Up Order. The Official Receiver will frequently pass the liquidation process to a private  insolvency practitioner (IP). However, on occasion when the OR deals with the compulsory liquidation, he or she will manage the paperwork, sell the assets to repay creditors, and investigate director conduct and report on director conduct to the relevant authorities.

Role of Liquidator in Members Voluntary Liquidation (MVL)

This process is used to close down a business that is solvent. The MVL is initiated voluntarily by the company’s directors and can only be used in the cases where insolvency isn’t an issue. As part of the process, shareholders must make a statutory declaration of solvency, which states that the business is solvent and can repay its creditors within 12 months.

The company appoints a liquidator to sell the company’s assets and ensure the company’s debts are settled with the proceeds. He or she will collect all monies owed to the business and settle any legal disputes. The shareholders will also receive net funds from the liquidator.

The role also encompasses making sure that all contracts are completed, ended or transferred fully in line with the law as well as deregistering the company for VAT purposes. Finally, the liquidator files the latest company accounts up to the date that the business ceased trading.

How can we help?

For liquidation advice, or to speak with one of our team to see how you could avoid a liquidation procedure, please call for free, no-obligation today or hit the orange live support button on the lower right-hand side.