Claims by a Company's Liquidator
Once a company is placed into liquidation, the company’s trading and financial history will be investigated by the appointed Liquidator and, if a negative report is filed in respect of the Directors’ conduct, the Secretary of State may issue a Director Disqualification Claim against all directors liable for such misconduct (whether they were directly involved or allowed such misconduct to occur).
From the Secretary of State’s point of view, Director Disqualification proceedings are instituted as a mechanism to protect the public interest, with the added deterrent of a Compensation Order being sought thereafter.
Alternatively, a Liquidator seeks to act in the interests of creditors who suffered as a result of the company being placed into liquidation.
As part of the Liquidator’s role, s/he will seek to recover all assets of the company with the aim of eventually paying a return, or dividend, to each creditor in accordance with the size of the creditor’s unpaid debt which is claimed in the company’s liquidation.
One of the main assets in a liquidation may be claims the company has or those claims arising under the Insolvency Act 1986 (as amended). Please click here for more information on the options available when faced with such claims.
Part of the liquidation assets may be commercial claims which the company had the ability to bring before it was placed into liquidation – for example as a result of contract disputes. A liquidator has the power to issue or continue such proceedings in the company’s name.
In the alternative, a company claim may have a claim against its own directors for repayment of the directors’ loan account or, more seriously, for breaches of their fiduciary duties.
A claim for damages arising from a breach of a director’s fiduciary duties would rarely be issued pre-liquidation, as the same directors are often in control of the company. However, a liquidator does not face such a conflict.
Such breaches of fiduciary duties may comprise assets wrongly removed or excessive income paid to Directors or, where a company is insolvent but continues to trade, may extend to the losses caused to creditors.
As opposed to company claims, a Liquidator may bring claims in his/her own name under the relevant insolvency provisions that exist under the Insolvency Act 1986.
Some claims are administrative in nature, for example demanding the provision of information, whilst others are brought solely for the purpose of recovering monies into the liquidation, such claims arising from various statutory claims that exist under the insolvency legislation.
We refer to our webpage which deals with the types of claim that a liquidator may make here.
Claims for unpaid or outstanding Tax
The above claims often directly arise from a winding-up petition presented by HMRC.
HMRC historically had a preferential status as an unsecured creditor in a liquidation, meaning they were entitled to repayment of their claim, from liquidation recoveries, before other unsecured creditors. However this preferential status was removed in 2003, and accordingly HMRC has no priority status amongst other unsecured creditors.
HMRC does have its own direct power of recovery of some or all claims for unpaid PAYE/NIC by issuing a Personal Liability Notice against director(s).
Otherwise, the Liquidator has no power to bring claims solely for non-payment of tax, although the Secretary of State has the power to issue a Disqualification Claim and then a Compensation Order where such discriminatory treatment of HMRC is found to exist.
At Francis Wilks & Jones we can provide such advice and assistance in respect of any claims by liquidators or to ensure you are protected against any such future claims.
Please call any member of our Tax Disputes Team for your consultation now on 0207 841 0390. Alternatively email us with your query at firstname.lastname@example.org and we will call you back at a time convenient for you.