Court winding up
Note – Transitional provisions
The Insolvency (Amendment) Rules 2010 (IAR) came into force on 6 April 2010 and have had some effect on compulsory liquidations in cases where the company enters into liquidation on the making of a winding-up order on a petition presented on or after 6 April 2010. The relevant paragraphs have been updated to reflect the changes and information is provided to show when they apply.
There are some exceptions to the rule of application where the liquidation is immediately preceded by an administration or a voluntary liquidation. Further details regarding these exceptions and the application of the transitional provisions can be found at Annex A.
(Amended December 2010)
The procedures in a court winding up are largely similar to those used in a creditors’ voluntary liquidation. Where the liquidator is other than the official receiver, he/she has a duty, when he/she considers that the winding up is complete, to summon a final general meeting of creditors to receive his/her report on the liquidation and to consider his/her release. The liquidator must give 28 days notice of the creditors' final meeting to all creditors of which he/she is aware and one month's notice in the London Gazette. A copy of the notice should also be sent to the official receiver at least 21 days before the creditors’ meeting. The liquidator may apply to the court to be relieved of the duty to send notice to all creditors of which he/she is aware. In considering the application, the court shall have regard to the cost of carrying out the duty, to the amount of the assets available and to the extent of the interest of creditors or contributories, or any particular class of them.
The Liquidator’s report laid before the meeting must contain a summary of the liquidator’s receipts and payments and for post 6 April 2010 petition cases details of his/her remuneration and expenses. Following the meeting, the liquidator must give notice to the court that the meeting has been held, a copy of which must be sent by the liquidator to the Secretary of State. That notice must state whether or not he/she has been given his/her release and be accompanied by a copy of the report laid before the meeting. If there is no quorum present at the final meeting, the liquidator shall report to the court that a final meeting was summoned but there was no quorum present and then the final meeting is deemed to have been held and the creditors not to have resolved against the liquidator having his/her release. The liquidator vacates office as soon as he/she has given that notice to the court and to the Registrar of Companies.
Notes: [s146][r4.125(1) as amended by the Insolvency (Amendment) Rules 2010, Form 4.22 as amended by the Insolvency (Amendment) Rules 2010] [r4.137] [r4.125A] [4.125(2)][r4.125(4),Form 4.42][r4.125(5)][s172(8)]
Post 6 April 2010 petition cases:
The IAR introduced additional requirements in respect of the vacation of office of liquidator on completion of a liquidation. The final meeting must not be held unless at least 8 weeks before holding the final meeting the liquidator sends to all known creditors, a draft of the report which he/she intends to lay before the meeting together with a statement of the creditor’s right to request further information or to challenge the remuneration and expenses. This is as required by rule 4.49D. Where a creditor does apply to court to challenge the remuneration or expenses under rule 4.131, the final meeting may not be held until the application has been disposed of.
As well as giving notice of the meeting in the London gazette, the liquidator may also advertise the meeting in such other manner as he/she thinks fit. The rules specify the contents to be included in these publications.
Notes: [r4.125 as amended by the Insolvency (Amendment) Rules 2010] [r4.49D][4.131]
A general meeting of creditors may be summoned for the purpose of removing the liquidator and a copy of the notice of the meeting should be sent to the official receiver. A liquidator has a duty to summon a general meeting when requested in writing to do so by one tenth in value of the creditors or contributories. Where the creditors resolve that the liquidator should be removed, the official receiver shall file in court the certificate of removal and the resolution is effective from the date it is filed. The official receiver must also send a copy of the endorsed certificate to the removed liquidator and the new liquidator (if any) and in post 6 April 2010 petition cases to the Registrar of Companies. The official receiver endorses the certificate so that where the meeting has appointed another liquidator, he/she can match the dates of removal and new appointment thereby avoiding the official receiver technically coming into office to fill a vacancy in any interim period. A general meeting of creditors may be summoned for the purpose of replacing the liquidator. If the liquidator was appointed by the court other than under section 139(4) or section 140(1) or was appointed by the Secretary of State, a general meeting of creditors shall be summoned for the purpose of replacing him/her only if he/she thinks fit, or the court directs or the meeting is requisitioned by not less than one quarter in value of the creditors.
The Secretary of State can direct the removal of any liquidator he/she has appointed. If the Secretary of State decides to remove the liquidator, he/she must first notify the liquidator and the official receiver of his/her decision and the grounds of it. He/she should also specify the period within which the liquidator may make representations against his/her decision. Any removal should be notified to the liquidator and the Official Receiver and filed in court.
A liquidator may be removed from office by an order of the court. The court may dismiss the application if it thinks that no sufficient cause is shown but it cannot do so unless the applicant has had an opportunity to attend a hearing. If the application is not dismissed, the court must fix a venue for it to be heard although it may require the applicant to make a deposit or give security for the costs to be incurred by the liquidator. At least 14 days before the hearing, the applicant must send the liquidator and the official receiver notice of the venue, together with a copy of the application and of any evidence in support. Where the court removes the liquidator it shall send copies of the order of removal to him/her and to the official receiver. The costs of the application are not payable out of the estate unless the court orders otherwise.
Notes: [s172(2) and r4.119 as amended by the Insolvency (Amendment) Rules 2010]
(Amended December 2010)
If the liquidator wishes to resign from office he/she must summon a meeting of creditors to accept his/her resignation. The liquidator may resign on the grounds of ill health, intention to cease practising as an insolvency practitioner, conflict of interest or change of personal circumstances which make his/her continuation in office impracticable. The notice to creditors should be accompanied by an account of his/her administration including a receipts and payments account and a statement that he/she has reconciled the account with the account held by the Secretary of State. A copy of the notice should be sent at the same time (being at least 21 days before the meeting in pre 6 April 2010 petition cases) to the official receiver, together with a copy of the accounts. The official receiver must also be notified of any property of the company which has not been realised or fully dealt with together with details of its value and location.
For post 6 April 2010 petition cases the IAR amended the notice provisions requiring that at least 28 days notice of the meeting must be given to the creditors by the liquidator. The notice to creditors must also be accompanied by a progress report for the period from the date of the liquidator’s appointment or the end date of the last progress report, to the date of the meeting.
If there is no quorum present at the creditors' meeting to receive the liquidator's resignation, the meeting is deemed to have been held and a resolution is deemed to have been passed that the resignation is accepted. The exception to this is in post 6 April 2010 petition cases where rule 4.108A applies i.e. an application has been made to the court claiming the liquidator’s remuneration and/or expenses are excessive and the matter has not been concluded, see paragraph 48.6A for further details.
The chairman of the meeting should within 3 business days of the date of the resolutions send a copy of the resolutions passed at the meeting to the official receiver. If the liquidator's resignation is accepted at the meeting, the chairman shall send to the official receiver a copy of the notice required by section 172(6) as soon as reasonably practicable after the resolution has been passed. The liquidator's resignation is effective from the date on which the official receiver files the copy notice in court and that date is to be endorsed on the copy notice. The official receiver will endorse the certificate so that where the meeting has appointed another liquidator, he/she can match the dates of removal and the new appointment to avoid the official receiver technically coming into office to fill a vacancy in any interim period. If the resignation is not accepted by the creditors, the liquidator may apply to the court for an order giving him/her permission to resign. The court will determine the date from which the liquidator's release is effective and send two copies of the order to the liquidator who should send one copy to the official receiver. When the official receiver becomes aware that the liquidator is intending to resign or has resigned he/she should liaise with IP Unit, London. In appropriate cases (e.g. cases with assets to be realised) a successor insolvency practitioner should be appointed, possibly another partner in the same firm or the next insolvency practitioner from the rota.
Notes: [s172 and4.108 as amended by the Insolvency (Amendment) Rules 2010] [r4.108(3) as amended by the Insolvency (Amendment) Rules 2010] [r4.137] [r4.109(2) as amended by the Insolvency (Amendment) Rules 2010] [r4.109(4) as amended by the Insolvency (Amendment) Rules 2010] [r4.109(6)] [r4.111,Form 4.34 as amended by the Insolvency (Amendment) Rules 2010]
When the liquidator appointed in a court winding up dies, it is the duty of the liquidator's personal representatives to give notice of the fact to the official receiver, specifying the date of death. Notice of the death may also be given by the partner of any firm where the liquidator was employed or by any person producing to the official receiver the relevant death certificate or a copy of it. The official receiver will give notice to the court for the purpose of fixing the date of the deceased liquidator's release. The official receiver becomes liquidator by virtue of his/her office ("ex officio") during any vacancy (see paragraphs 1.19 and 48.22). When the official receiver becomes aware that an insolvency practitioner has died, he/she should contact IP Unit, London for guidance. In such circumstances, IP Unit will liaise with the deceased liquidator's personal representatives and/or his/her authorising body as to the possible appointment of a successor practitioner. Often in such circumstances one of the liquidator's partners will take over the cases or the personal representatives will find a replacement insolvency practitioner. It is preferable if the same person becomes the replacement liquidator for all open cases. For post 6 April 2010 petition cases there are rules allowing for a block transfer of cases to be completed where an insolvency practitioner has died (rules 7.10A – 7.10D). If the official receiver remains the liquidator, he/she should apply for his/her release in the usual way on completion of the administration (see paragraph 37.11).
Notes: [r4.132 as amended by the Insolvency (Amendment) Rules 2010][s136(3)]
(Amended December 2010)
The liquidator will automatically vacate office if he/she ceases to be qualified to act as an insolvency practitioner. When the official receiver becomes aware that an insolvency practitioner has lost his/her authorisation, he/she should contact IP Unit, London for guidance (see also Chapter 55 Part 2 -Insolvency Practitioners). In such circumstances, IP Unit will liaise with the outgoing liquidator and/or his/her (former) authorising body as to the possible appointment of a successor practitioner. It is possible that the insolvency practitioner will find his/her own replacement to accept the appointment as liquidator(s). Occasionally if there are any difficulties IP Unit, London may ask the official receiver to find a replacement from the rota. Whatever the circumstances relating to the replacement liquidator, IP Unit will notify the official receiver of the new insolvency practitioner and liaise with the official receiver accordingly. IP Unit will obtain a listing of all open cases with the liquidator and deal with the collection of the accounting and administration records. IP Unit will also notify the loss of the insolvency practitioner's authorisation to IP Banking Section, Investigations and Enforcement Services (IES), Companies House and other authorities. The official receiver will be required to apply for the necessary Secretary of State appointments relating to the appointment of the replacement liquidator (see Chapter 17 Part 5). For post 6 April 2010 petition cases there are rules allowing for a block transfer of cases to be completed where an insolvency practitioner is unable to continue in office (rules 7.10A – 7.10D). In cases where there are no further asset realisations, the official receiver will be required to close the administration.
The release of the liquidator in a court winding up takes effect as follows:
When the Secretary of State gives the liquidator his/her release, he/she shall certify it accordingly and send the certificate to the official receiver to be filed in court. A copy of the certificate shall be sent by the Secretary of State to the former liquidator, whose release is effective from the date of the certificate. The release of the liquidator discharges him/her from liability in respect of acts or omissions of his/her in the winding up or otherwise in relation to his/her conduct. The liquidator also is protected from action under section 212 unless the leave of the court is obtained.
Notes: [s174(4)and r4.125(6)] [r4.125(5)] [r4.121(3)] [Form 4.41] [r4.121(2)] [r4.123(3)][r4.121(3)][Form 4.41][r4.132(4)][r4.134(3)][r4.121(4)(5)][s174(6)]
The provisional liquidator may be removed from office only by an order of the court, following an application by the provisional liquidator, the petitioner, a creditor, a contributory, the Secretary of State, a member state liquidator appointed in main proceedings or any person able to present a petition for the winding up of the company, including the company itself. The court will determine the date of his/her release on the application of the provisional liquidator. The appointment of a provisional liquidator will terminate on the making of the winding-up order by virtue of the fact that another liquidator takes office. However, if the winding-up petition is dismissed and a provisional liquidator is in office, the court should deal with the termination of his appointment at the same hearing.
The liquidator is obliged to deliver up to the person succeeding him/her as liquidator the company's assets (after deduction of properly incurred expenses), the records of the liquidation and the company's books and records. When the liquidator vacates office after the final meeting, he/she should deliver up to the official receiver the company's books and records which have not been disposed of, although it is more likely that the liquidator will have obtained authority from the official receiver to destroy the records in situ (see paragraphs 10.35 and 10.36). Where a liquidator vacating office has advised the official receiver of property that has not been realised he/she should forward all the proofs of debt to the official receiver.
Notes: [r4.138 and r4.148][R16(1) IR1994]
Where a liquidator ceases to be in office as a result of removal, resignation or loss of qualification as an insolvency practitioner, the official receiver should liaise with IP Unit, Birmingham. This is particularly so where a practitioner vacates office due to loss of qualification as an insolvency practitioner as IP Unit may need to co-ordinate action on the practitioner's open cases with other official receivers’ offices. Where another insolvency practitioner is not appointed liquidator immediately upon a removal or resignation, the official receiver becomes liquidator by virtue of his/her office (ex-officio) during any vacancy. If another liquidator is appointed, the official receiver should consider whether or not he/she needs to collect the accounting and administration records. If there is no successor insolvency practitioner appointment, the official receiver should ascertain which of the records are required to complete the administration of the estate and recover them. After the release of the liquidator but prior to the dissolution of the company, the official receiver becomes liquidator of the company and will be required to deal with any matters arising relating to the company.
Where the liquidator vacates office prior to the holding of the final general meeting of creditors under section 146, he/she shall within 14 days of vacating office send to the Secretary of State an account of his/her receipts and payments as liquidator for any period not covered by an account previously sent by him/her or if no account has been sent, an account of his/her receipts and payments in respect of the whole period of his/her office. Where a final meeting has been held or has been deemed to have been held, the liquidator shall send to the Secretary of State within 14 days of the meeting or his/her report to the court an account of his/her receipts and payments as liquidator which are not covered by any previous account submitted by him/her or, if no account has been submitted, an account of his/her receipts and payments in respect of the whole period of his/her office. If a statement of affairs has been submitted, any account sent shall be accompanied by a summary of the statement of affairs and show the amount of any assets realised and explain the reasons for any assets not realised. Where a statement of affairs has not been submitted, any account sent by the liquidator shall be accompanied by a summary of all known assets and their estimated values and show the actual amounts realised and explain the reasons for any assets not realised. Any account sent to the Secretary of State shall, if he/she requires, be audited but in any circumstances the liquidator should send to the Secretary of State on demand any documents (including vouchers and bank statements) and any information relating to the account.
Notes: [Reg 14 IR 1994]
Due to the updating of advice and guidance in this part, the information previously contained in this paragraph is no longer available.