MARCH 2011
PART 5
WINDING-UP PETITION HEARINGS AND TERMINATION OF APPOINTMENT
This part deals with the termination of a provisional liquidator appointment both before, and at, a winding up hearing. It also covers the return of the control of the company’s business to the company, where the winding-up petition is dismissed by the court.
2.133 Termination of provisional liquidator appointment
The appointment of the official receiver, as provisional liquidator, may be terminated by the court on the official receiver’s application, or on that of a creditor, a contributory, the Secretary of State or any person able to present a petition for the winding up of the company, including the company itself [note 1].
In relation to a winding-up petition, the appointment of a provisional liquidator will terminate when a winding-up order is made by virtue of the fact that another liquidator (normally the official receiver) takes office [note 2]. Where a winding-up petition is dismissed and a provisional liquidator is in office, the court should deal with the termination of his/her appointment at the same time.
2.134 Release of provisional liquidator
The official receiver (or insolvency practitioner) has his/her release as provisional liquidator with effect from such time as the court may, on an application by him/her, determine [note 3].
When the official receiver obtains his/her release as provisional liquidator, from the time of release he/she will be discharged from all liability both in respect of acts or omissions in relation to his/her conduct as provisional liquidator [note 4].
2.135 Release of official receiver as provisional liquidator
The release of the provisional liquidator is likely to be contained within a court order terminating his/her appointment, or would be dealt with by the court at the winding up hearing (see paragraph 2.133) and be specified in the winding-up order made by the court.
2.136 Hearing for termination of provisional liquidator appointment
The official receiver, as provisional liquidator, should consider whether attendance at the hearing of the petition, or relevant application, is necessary for the purpose of ensuring that the court is aware that any order made needs to provide for payment of the amount due in respect of his/her expenses and remuneration (see Part 4). If the official receiver does not attend a report should be lodged setting out all relevant details. The court may give such directions as it thinks fits with respect to the accounts of the administration or any other matters it thinks appropriate [note 5]. Unless the court otherwise orders, the official receiver may retain sufficient of the company’s property to settle the amount due in respect of remuneration and expenses [note 6].
2.137 Attendance at hearing of winding-up petition
The official receiver’s sole purpose in attending the hearing of the petition is to make representations about the amounts due in respect of expenses and remuneration. The official receiver should not make any representations in respect of the petition itself [note 7]. If, however, the judge or registrar asks the official receiver whether there are any matters which he/she considers should be brought to the court’s attention, the official receiver may refer to the company’s financial position by reference to the information which has been received during the conduct of the case.
2.138 Account of administration of provisional liquidation
It may be useful if the official receiver inquires of the court before the winding up hearing whether he/she will be expected to lodge an account of his/her administration, so that this may be included in any report to be filed [note 8].
2.139 Petition dismissed due to material non-disclosure
If the court finds that a winding-up petition was presented containing material non-disclosure relating to the company’s affairs, then the court may recall the appointment of the provisional liquidators. The court made such an order in a case where the company had attempted to give the petitioner bankers drafts, covering the amount of the debt, prior to the petition hearing. This had not been disclosed at the hearing for the appointment of provisional liquidators. The petition was dismissed and the court ruled that the provisional liquidator’s appointment would have been recalled whether or not the petition was dismissed [note 9].
2.140 Action when petition dismissed
If the winding-up petition is dismissed and the official receiver’s provisional liquidator appointment is terminated, then a file note should be made of the hearing noting the details of any order made regarding costs and the reasons for the dismissal. The official receiver will be sent a copy of the order terminating his/her appointment by the court. PIU will need to arrange for the return of the company property to the directors. The company’s bankers will also need to be notified so that any amounts held in the accounts, previously frozen, may be released to the company (subject to any costs the official receiver is entitled to claim from the company’s property) [note 10]. All parties previously notified of the official receiver’s appointment as provisional liquidation will need to be notified that the appointment has terminated and that the winding-up petition has been dismissed.
2.141 Notification of termination of appointment to various parties
When the official receiver’s appointment as provisional liquidator’s is terminated, unless the termination is on the making of a winding-up order or the court directs otherwise, the official receiver should send notice;
(a) as soon as reasonably practicable to the registrar of companies at Companies House;
(b) as soon as reasonably practicable to be gazetted (see Chapter 5, paragraph 5.25); and
(c) the termination may also be advertised in such other manner as the provisional liquidator thinks fit [note 11].
Additionally, if the notice is under (b) or (c) then it must state that the official receiver’s appointment as provisional liquidator has been terminated, the date of termination, and that the appointment terminated otherwise than on the making of a winding-up order [note 12].
2.142 Notification of winding-up order or petition dismissal for accounting purposes
The official receiver does not need to inform Finance Section or Estate Accounting Services when his/her appointment has ceased. The termination of the provisional liquidation appointment is entered onto ISCIS when a winding-up order is made or if the petition is dismissed, which automatically updates the financial systems.
2.143 Winding-up order made when official receiver was provisional liquidator
Following a winding-up order being made against a company where the official receiver previously acted as provisional liquidator the case should be proceeded with as normal, although the official receiver may have already interviewed the director(s), and gathered sufficient information to refrain from conducting a further interview. An investigation decision will be needed, which will not have been taken in the provisional liquidation, which may necessitate further enquiries and/or interviews of company officers.
2.144 Winding-up order made when insolvency practitioner provisional liquidator previously in office
Where an insolvency practitioner has previously acted as provisional liquidator, PIU may have dealt with the initial notification of the application for a provisional liquidator appointment [note 13], or assisted the local official receiver in dealing with these. When a winding-up order is subsequently made, PIU will only retain that case if it meets the usual criteria for allocation to PIU (see PIU’s home page). This means that a local official receiver may encounter cases where a previous provisional liquidation has taken place. The official receiver should contact PIU for any information they may have in relation to the case.
2.145 Local official receiver appointed as liquidator when insolvency practitioner provisional liquidator previously in office
When a local official receiver is appointed liquidator following an insolvency practitioner provisional liquidator holding office, it is often possible for a Secretary of State liquidator appointment to be made if sufficient assets are held to warrant such an appointment. Ultimately, it is the creditor’s decision as to whom should be appointed as liquidator, but the same insolvency practitioner may be appointed if the creditors wish.
2.146 Notification to Companies House when winding-up order made
Upon the making of a winding-up order, the order will usually be sent by the court to Petitions and Transfers Section, who will in turn forward it to the appropriate official receiver. Where a copy of the order is sent directly to the official receiver, then he/she should send one sealed copy of the order to Petitions and Transfers Section so that they can make a note of the order and file it at Companies House.
2.147 Outstanding matters when winding-up order made
When the winding-up order is made, any provisional liquidation will terminate and the official receiver will become liquidator of the company [note 14]. The official receiver should, wherever possible, make immediate application to the court for an order [note 15] in relation to all outstanding matters in the provisional liquidation in respect of which a liquidator needs the sanction of either the court or, where appropriate, a liquidation committee [note 16] (see paragraph 2.148 below). This will normally involve the continuation or commencement of legal proceedings or the carrying on of a business. Such an order sanctioning the continuation of matters in relation to which the permission of the court was obtained in the provisional liquidation should be sought even where the official receiver has been acting as provisional liquidator, since the change in the nature of office makes further sanction necessary.
2.148 Application to Secretary of State regarding outstanding matters when winding-up order made
In some cases it will not be possible to deal with all relevant matters on, or immediately following, the hearing of the petition. This may particularly be the case where a practitioner has been acting and the official receiver has had little previous involvement with the case. Where the sanction of a liquidation committee is required the official receiver should, in the first instance, apply to Technical Section who act as representative for the Secretary of State in the absence of a liquidation committee, for the necessary permissions in relation both to matters previously in train or newly arising. The application should be sent in writing to Technical Section, who should, especially in relation to any matter requiring urgent attention, be given prior warning by telephone.
2.149 Hearing of application for an administration order
Although this situation is unlikely to occur often, the official receiver should ensure, where acting as provisional liquidator, that he/she attends the hearing of any application for an administration order [note 17], which will of necessity involve the dismissal of the winding-up petition and the termination of his/her appointment. Notice of the application will be given to the official receiver as provisional liquidator [note 18].
2.150 Provision for remuneration and expenses in administration order hearing
At the hearing for an administration order, the official receiver, as provisional liquidator, should ask the court to include in any order it makes provision for his/her remuneration and expenses. Guidance on the source of payment and calculation of the provisional liquidator’s remuneration is contained within insolvency legislation [note 19], and still operates to protect the official receiver’s position in these circumstances.
[Back to Part 4 – Deposits, indemnities and remuneration]