Liquidator (law)
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In law, a liquidator is the officer appointed when a company goes into winding-up or liquidation who has responsibility for collecting in all of the assets of the company and settling all claims against the company before putting the company into dissolution.
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[edit] Powers
In most jurisdictions, a liquidator's powers are defined by statute.[1] Certain powers are generally exercisable without the requirement of any approvals; others may require sanction, either by the court, by an extraordinary resolution (in a members' voluntary winding up) or the liquidation committee or a meeting of the company's creditors (in a creditors' voluntary winding-up).[2]
The liquidator would normally require sanction to pay creditors and to make compromises or arrangement with creditors. Without sanction (unless it is a compulsory winding-up) the liquidator may carry on legal proceedings and carry on the business of the company so far as may be necessary for a beneficial winding-up. Without sanction, the liquidator may, inter alia, sell company property, claim against insolvent contributories, raise money on the security of company assets, and so all such things as may be necessary for the winding-up and distribution of assets.
[edit] Duties
In compulsory liquidation, the liquidator must assume control of all property to which the company appears to be entitled.[3] The exercise of his powers is subject to the supervision of the court. He may be compelled to call a meeting of creditors or contributories when requested to do so by those holding above the statutory minimum.[4]
In a voluntary winding-up, the liquidator may exercise the court's power of settling a list of contributories and of making calls, and he may summon general meetings of the company for any purpose he thinks fit.[5] In a creditor's voluntary winding-up, he must report to the creditor's meeting on the exercise of his powers.[6]
The liquidator is generally obliged to make returns and accounts,[7] owes fiduciary duties to the company and should investigate the causes of the company's failure and the conduct of its managers, in the wider public interest of action being taken against those engaged in commercially culpable conduct.[8]
A liquidator who is appointed to wind-up a failing business should act with professional efficiency and not exercise the sort of complacency that might have caused the business to decline in the first place.
[edit] Misconduct
Where, during the investigation of the affairs of the company, the liquidator uncovers wrongdoing on the part of the management of the company, he may have power to bring proceedings for wrongful trading or, in extreme cases, for fraudulent trading.
However, the liquidator cannot normally enter into a champertous agreement to assign the fruits of an action to a third party offering to finance the litigation.[9]
The liquidator may also seek to set aside transactions which were entered into by the company in the time immediately preceding the company going into liquidation where he forms the view that they constitute an unfair preference or a transaction at an undervalue.
[edit] Removal
Depending upon the type of the liquidation, the liquidator may be removed by the court, by a general meeting of the members or by a general meeting of the creditors.[10]
The court may also remove a liquidator and appoint another if there is "cause shown" by the applicant for his removal. It is not normally necessary to demonstrate personal misconduct or unfitness for this purpose. However, it will be enough if the liquidator fails to display sufficient vigour in the discharge of his duties, for instance, by not establishing the current assets and recent trading of the company or in not attempting to secure favourable terms for the company in relation to the disposal of its assets.[11]
[edit] Footnotes
- ^ In the United Kingdom, they are set in Schedule 4 to the Insolvency Act 1986
- ^ In the United Kingdom, see sections 165-168 of the Insolvency Act 1986
- ^ In the United Kingdom, see section 144 of the Insolvency Act 1986
- ^ In the United Kingdom, one-tenth of the total value. See section 168 of the Insolvency Act 1986
- ^ In the United Kingdom, see section 165 of the Insolvency Act 1986
- ^ In the United Kingdom, see section 166 of the Insolvency Act 1986
- ^ In the United Kingdom, see section 170 of the Insolvency Act 1986
- ^ Re Pantmaenog [2004] 1 AC 158
- ^ Re Oasis Merchandising [1998] 1 Ch 170
- ^ In the United Kingdom, see sections 171-172 of the Insolvency Act 1986
- ^ Re Keypak Homecare Ltd [1987] BCLC 409
