Sections 332 to 334 of the Companies Act 1997 are the liquidation counterparts of sections 283 to 288 for receivers — but wider.
Section 332(1) — the supervisory powers
(a) give directions in relation to any matter arising in connection with the liquidation;
(b) confirm, reverse, or modify an act or decision of the liquidator;
(c) order an audit of the accounts of the liquidation;
(d) order the liquidator to produce the accounts and records for audit and provide the auditor with such information as the auditor requests;
(e) in respect of any period, review or fix the remuneration of the liquidator at a level which is reasonable in the circumstances;
(f) order the liquidator to refund any amount retained as remuneration that is found to be unreasonable;
(g) declare whether or not the liquidator was validly appointed or validly assumed custody or control of property;
(h) make an order concerning the retention or disposition of the accounts and records of the liquidation or of the company.
The Court may confirm, reverse, or modify an act or decision of the liquidator. That is a direct review of the merits — a creditor unhappy with a decision to sell an asset, admit or reject a claim, abandon a cause of action or settle a claim may ask the Court to reverse it.
The price is a leave requirement: a creditor, shareholder, other entitled person or director must obtain the Court’s leave. The liquidator, a liquidation committee and the Registrar may apply as of right. Leave filters out attempts to relitigate every commercial judgment.
They are in addition to the Court’s other jurisdiction relating to liquidators, and may be exercised in relation to a matter occurring before or after the commencement of the liquidation, or after the removal of the company from the register, and whether or not the liquidator has ceased to act when the application or the order is made.
So a liquidator’s conduct can be examined after the company has been struck off and the liquidator has retired. Compare section 283(4), which is similar but does not mention removal from the register.
A liquidator who has obtained a direction with respect to a matter connected with the exercise of their powers or functions, and acted in accordance with it, is entitled to rely on having so acted as a defence to a claim.
But the Court may, on the application of any person, order that by reason of the circumstances in which the direction was obtained the liquidator does not have that protection.
Sections 333 and 334 — orders to comply
A failure by a liquidator to comply with a relevant duty arising (a) under this or any other Act or rule of law or the rules of any court, or (b) under any order or direction of the Court other than an order to comply made under section 334.
Applicants: a liquidator; a person seeking appointment as liquidator; a liquidation committee; a creditor, shareholder, other entitled person, or director; a receiver appointed in relation to property of the company; or the Registrar. No leave is required.
Except where the applicant is a liquidator, notice of the failure must have been served on the liquidator not less than five days before the application, and there must be a continuing failure to comply at the date of the application.
(3) (a) relieve the liquidator of the duty, wholly or in part; or (b) order compliance, without prejudice to any other remedy for breach of duty.
(4) Where a person fails to comply with such an order, or is or becomes disqualified under section 328: (a) remove the liquidator from office; or (b) order that the person may be appointed and act, or continue to act, notwithstanding section 328.
(5) Where a person is shown to be unfit to act as liquidator by reason of persistent failures to comply or the seriousness of a failure, the Court shall make a prohibition order for a period not exceeding five years.
(6) A person subject to a prohibition order shall not act as a liquidator in a current or other liquidation, or as a receiver in a current or other receivership.
Evidence that, on two or more occasions within the preceding five years, (a) the Court has made an order to comply against the same person, or (b) an application for such an order was made and the person complied after the application and before the hearing, is — in the absence of special reasons to the contrary — evidence of persistent failures.
Paragraph (b) again catches the practitioner who complies only when sued. Section 287 makes receivership and liquidation defaults count together for the receiver equivalent.
Under section 334(8) the Court may extend time, impose terms, or make ancillary orders. Under section 334(9) a copy of every prohibition order must be given to the Registrar within one month by the applicant, and kept on a public register indexed by the liquidator’s name.
Section 321 — conduct prohibited in a liquidation
(a) leave the country with the intention of (i) avoiding payment of money due to the company, (ii) avoiding examination in relation to the affairs of the company, or (iii) avoiding compliance with an order of the Court or another obligation under this Part;
(b) conceal or remove property of the company with the intention of preventing or delaying the liquidator taking custody or control of it;
(c) destroy, conceal, or remove records or documents of the company.
Contravention is an offence, penalty under section 413(3) — the most serious penalty tier.
Paragraphs (a) and (b) require an intention. Paragraph (c) does not: destroying, concealing or removing records or documents of the company during a liquidation, or once an application has been made, is an offence without proof of purpose. Anyone holding company records once a liquidation is in prospect should preserve them.
Section 322 is the positive counterpart: a present or former director or employee shall forthwith give the liquidator details of company property in their possession or control, and give up or deal with that property as the liquidator directs. Failure is an offence under section 413(3).
Section 323 — essential services
An “essential service” is the retail supply of electricity or gas, the supply of water, or telecommunications services. Notwithstanding any other Act or any contract, a supplier shall not refuse to supply a liquidator or a company in liquidation, or make supply conditional on payment, by reason of charges due for a period before the commencement of the liquidation.
(4) Charges incurred by a liquidator for an essential service are an expense incurred by the liquidator for the purposes of Schedule 9 clause 1(a) — so they are paid first, out of the assets.
The liquidation version is slightly wider than the receivership version in section 289: it includes the retail supply of gas, and it expressly ranks post-commencement charges as a liquidation expense.
Sources
- Companies Act 1997 — ss 283, 287, 289, 321–323, 328, 332–334, 413; Schedule 9
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.