Only a licensed insolvency practitioner can be appointed over formal insolvency proceedings such as compulsory liquidation. A liquidator is a licensed insolvency practitioner who is subject to oversight by their professional body.
A liquidator usually comes from either an accountancy or a legal background, but must pass specific insolvency exams in order to become an insolvency practitioner. From then on, they are still subject to authorisation from their professional body and must continue their learning throughout their career.
Responsibilities of a liquidator
A liquidator is the person appointed over a company when it goes into liquidation. They have the responsibility for
- collecting in all of the assets of the company;
- as part of the liquidation process, will bring about liquidation sales in order to make sure that those assets are available to be distributed to the creditors of the company.
- if there is any surplus then money will go back to the shareholders.
The liquidator acts as an agent for the company, so the company’s assets don’t vest in them. They can ask the court for a particular asset to vest in them if necessary, but this is rarely needed as they have extremely wide powers to deal with all of the company’s property.
A liquidator will liaise with the directors and shareholders throughout the process of compulsory liquidation. However, once the company goes into liquidation then the directors no longer have any power over the company, and the liquidator makes decisions about the company, sometimes with the consent of creditors where necessary.
It is to the benefit of both the liquidator and the directors that they maintain a good working relationship so that the liquidator is provided with all of the company information, so that they can bring about the collection and distribution of the assets of the company and deal with all matters in the best possible way.
What happens if I don’t like my liquidator or think that they are not acting in the best interest of the company and creditors?
If you have a complaint against a liquidator then you can apply to the court if the liquidator is breaching their statutory duty. The court has very wide powers to make any order it thinks fit if it finds against the liquidator.
For example, it is possible to challenge to how much the liquidator is paid. If the court agrees that the liquidator’s remuneration is excessive or is not clear enough then they can make an order to alter it.
It should be noted however that the vast majority of licensed insolvency practitioners act in a professional manner and in the best interest of the creditors. Therefore while there may be some decisions that directors won’t agree with, this does not mean that the liquidator is not acting under their duty of care to the creditors generally.
Challenging a liquidator is not easy and should only be considered if the evidence is very strong. courts are reluctant to interfere with a liquidator carrying out their role. As you can imagine, the job of liquidator is not easy or popular. They will not be familiar with the company in the same way that its officers have been, and their role is to protecting the creditors as a whole, not individual interests.
If you would like more details on the role of the liquidator, if you are considering company liquidation, or if your company is in liquidation and you are concerned about a liquidator, then call our friendly team of experts at Francis Wilks & Jones to talk through your concerns.