June 2008
Part 5 Companies - Stay of winding up proceedings
(Amended December 2010)
The legislation contains no provision for a winding-up order to be annulled but the court may at any time, after a winding-up order has been made, on the application of either the liquidator, the official receiver or any creditor or contributory and on proof to the satisfaction of the court that all proceedings in the winding up ought to be stayed, make an order staying all proceedings in the winding up. This may be a permanent stay or a stay for a limited time on such terms and conditions as the court thinks fit [Note 1]. Where the stay is for a limited period, this does not affect the official receiver’s obligation to report on the conduct of the officers of the company under the Company Directors Disqualification Act 1986. The provisions for a stay of a winding-up order against a company are equally applicable in respect of an order for the winding up of a partnership. Any application to the court under section 147 must be heard in open court, unless the court otherwise directs [Note 2]. The court may also stay proceedings under its inherent jurisdiction or under the Civil Procedure Rules as appropriate [Note 3], which also apply to insolvency proceedings, but such provisions are rarely used in practice.
6.69 Oral court hearings where initial application for permission to apply for stay of proceedings is refused
(Amended December 2010)
Where an application for permission to apply for stay of proceedings is initially refused on paper, the court may offer the applicant an oral court hearing to re-consider the application. The official receiver and petitioner may be invited to attend such a hearing to consider the application for permission to apply for a stay of proceedings, and the official receiver should consider attending the hearing in case he/she can assist the court. Should the permission to apply for a stay of proceedings be granted by the court and the stay is subsequently successful, the official receiver should seek his/her costs of the liquidation proceedings to date.
6.70 Contents of order staying proceedings
The order staying the winding up proceedings should state that the liquidator will be released when the certificate of release issued by Estate Accounts Services (EAS)(acting for the Secretary of State) is filed at court. The order should also include details of how the deposit is to be disposed of. If it is the intention of all the parties that the stay is permanent, the court may state in the order that the deposit be returned to the petitioning creditor’s solicitor. If the court declines to deal with the deposit in this way then the deposit should be transferred to reserved funds.
6.71 Stay of liquidation not automatic where creditors paid in full
The fact that creditors have been paid in full does not itself justify a stay of the liquidation Re Telescriptor Syndicate Ltd [1903] 2 Ch 174. In Re Calgary and Edmunton Land Co. Ltd [1975] 1 WLR 355 it was held that a winding-up order should not be stayed unless:
6.72 Effect of permanent stay on liquidation
If the court makes an order under section 147(1) staying the proceedings altogether, the effect is that the liquidation is terminated and the directors of the company are re-instated in control of the company which is no longer in liquidation. The liquidator is then entitled to his/her release.
6.73 Effect of time limited stay on liquidation
Where a stay is for a limited period, the liquidator will remain in control and the director’s powers remain in suspense. The terms upon which the stay is granted should be clearly stated in the court order indicating whether the liquidator remains in control of the assets and all other matters relevant to the stay and its effect on the conduct of the liquidation. Whether or not the official receiver, as liquidator, remains in control of the assets will depend on the purpose of the stay. Accordingly, there may be some circumstances where the effect of the stay of the liquidation is that the official receiver’s responsibility for assets terminates but others where this is not the case. At the hearing of the application for the stay, the official receiver should ask the court to state clearly in its order the effect of the stay on the official receiver’s position as liquidator and, if appropriate, he/she should make representations as to the extent of the stay, in addition to any other representations he/she may make as to whether or not it should be granted (in his/her view).
The official receiver’s obligation to report on the conduct of the officers of the company under the Company Director’s Disqualification Act 1986 (CDDA) remains unaffected where the stay of winding up proceedings is for a limited period of time.
6.74 Insurance
Where the official receiver has insured assets prior to the stay, the insurance should be left in force and no steps should be taken to cancel it. The official receiver should refer to the terms of the order to establish whether the protection of assets remains his/her responsibility and, if so, to effect any necessary insurance not previously in place (see paragraph 6.72).
6.75 Report by official receiver
The court may require the official receiver to submit a report relating to any facts or matters which are in his/her opinion relevant to the application[Note 4]. This may include matters similar to those referred to in paragraph 6A.20 (Bankruptcy annulments) and any possible prosecution or disqualification offences or misconduct by the officers of the company. If the liquidator makes the application, the official receiver should only report where he/she is aware of relevant facts not incorporated in the liquidator’s report. The officers of the company are under a duty to co-operate with the official receiver to enable him/her to obtain all relevant facts to complete his/her report [Note 5].
6.76 Matters to be referred to in court order
(Amended April 2009)
The official receiver should attend the hearing and ensure that the court provides for the following:
The official receiver should secure the payment of his/her expenses of the winding up. If the company requires the stay to be gazetted and, where appropriate, advertised in the manner of the original notice, it should apply to the court. If the official receiver is to act in this matter, he/she must receive the costs of so doing from the applicants prior to arranging such gazetting and advertisement.
6.77 Section 122 pension scheme notice to be issued irrespective of appeal, rescission or stay of proceedings
If the official receiver's appointment as liquidator comes to an end before he/she is able to form a view as to whether support for the pension scheme will continue he/she is required under section 122(4) of the Pensions Act 2004 (PA2004) to issue a notice to that effect.
Section 122(6) of the PA2004, requires the official receiver to send the notice to:
A proforma for the section 122(4) Pension Scheme Notice can be accessed at: www.pensionprotectionfund.org.uk/.../ceasing_to_act_form.pdf
For further information regarding the official receiver's obligations under PA 2004 see Chapter 61, Part 4
6.78 Action after permanent staying order
A copy of any order staying winding up proceedings must be forwarded by the company to the Registrar of Companies [Note 6]. Although the legislation provides for an alternative procedure to be prescribed, the Rules make no such provision as it is considered that the forwarding of such an order should be the company’s responsibility, not the official receiver’s. The winding-up order is still in existence but the effect of the order is to remove the control of the company from the official receiver or liquidator. In such circumstances any assets and all records of the company should be returned to the company’s officers without delay (subject to satisfactory arrangements having been made for the payment of the liquidation expenses).
6.79 Notifying EAS following permanent staying order
August 2008
Following the upgrade of the LOLA menu function glm81 in July 2008, to facilitate the closure of the LOLA account or write off the debit balance, the details of the permanent stay should be entered on LOLA glm81. See paragraph 6A.97 for full details on entering glm81 information.
In addition, the official receiver must send the information sheet “Permanent Stay Notification” (see Annex 1 for an example of this information sheet) to EAS (Corporate Governance), to ensure that EAS identify such cases to prevent form NOTCH (Notice to Companies House) being sent to Companies House.
6.80 Official receiver’s functions and duties
Until the winding up proceedings are stayed, or the order rescinded or discharged following an appeal, the official receiver is required to carry out his/her duties both as official receiver [Note 7] and as liquidator [Note 8] (assuming that no other liquidator has been appointed). Although he/she may limit his/her enquiries in the face of an early and probably successful appeal or application for a stay, he/she should in any event take all necessary steps to discover, secure and preserve the company’s assets and to obtain a statement of affairs [Note 9] [Note 10] if this is likely to be helpful to him/her.
6.81 Official receiver’s costs where full administration fee charged
Where the winding-up order is stayed and the winding-up order was made on or after 1 April 2004, the full administration fee (which excludes VAT) (fee W1) should only be charged when it can reasonably be said that the official receiver has undertaken material work on a case. The official receiver's full administration fee should not be charged where, for example, he/she has not issued initial notices or committed other expenditure in the case.
Where the official receiver considers that the full administration fee should be charged it should be noted that the administration fee does not include the cost of any disbursements associated with the realisation of assets or the distribution of funds to creditors, these should be charged separately. On receipt of the monies the official receiver must pay the funds into the estate account. In order for the estate account to balance, the official receiver must authorise a payment to reimburse Finance Section. This instruction should be sent to EAS.
Invoices received after 1 April 2004 and relating to cases where the winding- up order was made on or after 1 April 2004 should be sent to Finance Section for payment.
6.82 Official receiver’s costs where time and rate fee charged
Where the winding-up order is stayed and it is not justifiable to charge the full administration fee, a reduced fee could be charged with sanction of the court. The reduced administration fee could range between £0 and £2,160 (i.e. the full administration fee level as at June 2008) according to the circumstances of the case. The official receiver should calculate the administration fee to be charged and then seek payment of that sum, requesting that the court orders the permitted level of administration fee to be reduced to the level calculated. The amount of the maximum administration fee chargeable is regularly re-assessed.
The administration fee payable to the official receiver following a stay of winding up proceedings should be calculated by multiplying the time the official receiver and his/her staff have spent undertaking work by the hourly rates set out in the Insolvency (Amendment) Regulations 2004 (see Chapter 36 Annex E) and not on the administration fee (W1). The time and rate calculation should not include VAT. If the full administration fee is not charged, the costs of disbursements (e.g. advertising costs) are not covered and should be charged separately when costs are sought. The official receiver should include in his/her calculation any costs paid centrally by Finance Section which are not charged directly to the estate.
For further information on fees and disbursements see Chapter 36 part 1.
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