A liquidator arrives at a failed company knowing nothing. Sections 311 to 318 of the Companies Act 1997 are the investigative toolkit.
Section 311(1) — documents from anyone
A liquidator may, from time to time, by notice in writing, require a director or shareholder of the company or any other person to give to the liquidator such records or documents of the company in that person’s possession or under that person’s control as the liquidator requires.
The reach is unlimited as to person — any other person — but limited as to subject: records or documents of the company. It does not extend to a third party’s own records.
Sections 311(2) to (4) — attendance and examination
(a) a director or former director; (b) a shareholder; (c) a person involved in the promotion or formation of the company; (d) a person who is or has been an employee; (e) a receiver, accountant, auditor, bank officer, or other person having knowledge of the affairs of the company; (f) a person acting or who has acted as a lawyer for the company.
(a) attend on the liquidator at such reasonable time and place as the notice specifies;
(b) provide such information about the business, accounts, or affairs of the company as the liquidator requests;
(ba) be examined on oath or affirmation by the liquidator or a lawyer acting for the liquidator on any matter relating to the business, accounts or affairs of the company;
(c) assist in the liquidation to the best of the person’s ability.
Under subsection (4), a person may be required to attend at a meeting of creditors. Under subsection (9), failure to comply with a notice is an offence, penalty under section 413(2).
A person acting or who has acted as a lawyer for the company is expressly within section 311(2). The liquidator now controls the company, so the company’s own privilege is the liquidator’s to waive; the lawyer cannot assert it against them. Privilege belonging to a director personally, in their own separate retainer, is a different matter.
The liquidator may pay reasonable travelling and other expenses to a person within paragraph (d), (e) or (f) who is not an employee of the company. On the application of the liquidator or that person, the Court may order that they receive reasonable remuneration and travelling and other expenses.
But under subsection (7) such a person is not entitled to refuse to comply merely because an application has not been made or determined, or because remuneration or expenses have not been paid in advance or at all. Compliance first, payment afterwards.
Section 314A supplies the procedure: the liquidator or their lawyer may administer an oath or take an affirmation; the person examined is entitled to be represented by a lawyer; and the examination must be recorded in writing or by tape recorder or similar device.
Sections 312 to 314 — receivers, liens and charged documents
A receiver is not required to hand over records or documents that the receiver requires for exercising powers or functions as receiver. But the liquidator may require the receiver (a) to make them available for inspection at reasonable times, and (b) to provide copies or extracts — and the liquidator may take copies. The liquidator shall pay the receiver’s reasonable expenses of complying.
(1) A person is not entitled, as against the liquidator, to claim or enforce a lien over records or documents of the company.
(2) Where the lien arises in relation to a debt for the provision of services to the company before the commencement of the liquidation, that debt is a preferential claim under section 360 to the extent of K5,000.00, or such other amount as may be prescribed at commencement.
(3) The section does not apply to a company put into liquidation by shareholders or the board where the board passed a solvency resolution of the kind in section 293(8) and section 294 does not apply.
Accountants and bookkeepers commonly hold a lien over the records of an unpaid client. Section 313(1) removes it as against the liquidator, because a liquidation cannot proceed without the books. Subsection (2) compensates: the unpaid fee becomes a preferential claim up to K5,000 — this is the claim referred to in Schedule 9 section 2(e), which sits with the employee entitlements and is not subject to the K20,000 per-employee cap.
Subsection (3) withdraws both the removal of the lien and the preference where the company is being wound up as a solvent company. There, the adviser will be paid in full anyway.
(1) A person must give a document to the liquidator under section 311 even though possession of the document creates a charge over property of the company.
(2) Production does not prejudice the existence or priority of the charge, but the liquidator shall make the document available to the person entitled to it for the purpose of dealing with or realising the charge or the secured property.
This deals with the pledgee holding title deeds or share certificates. The security is untouched; only the physical custody changes, and access must be given back when needed.
Sections 315 to 317 — the Court’s role
315. The Court may, on the liquidator’s application, order a person who has failed to comply with a section 311 requirement to comply.
316(1). The Court may order a person to whom section 311 applies to (a) attend before the Court and be examined on oath or affirmation by the Court, the liquidator or the liquidator’s lawyer on any matter relating to the business, accounts, or affairs of the company; and (b) produce any records or documents relating to those matters in their possession or control.
316(2) and (3). The examination shall be recorded in writing and signed by the person examined; and, subject to any directions of the Court, the record is admissible in evidence in any proceedings under this Part or under section 426.
(1) A person is not excused from answering a question in the course of a section 316 examination on the ground that the answer might incriminate or tend to incriminate that person.
(2) But the testimony is not admissible as evidence in criminal proceedings against that person, except on a charge of perjury in relation to that testimony.
The privilege against self-incrimination is abrogated, and a limited immunity substituted. The testimony itself cannot be used in a criminal case against the person; other evidence obtained can be, and the testimony is fully available in civil proceedings under Part XVIII — voidable transaction claims, insolvent trading claims — and in section 426 disqualification proceedings.
The same structure appears in section 404 for the Registrar’s examinations. Both are consistent with the constitutional protection in the Constitution being subject to law: the answer must be given, but it cannot be used to convict the person who gave it.
Section 318 — enforcing shareholder liability
The liquidator may (a) where a shareholder is liable to calls, make calls on the shares held by that shareholder; and (b) where a shareholder or former shareholder is liable to the company, enforce that liability. A call shall be made in writing.
Under section 36, a shareholder is not liable for the company’s obligations merely by holding shares, but is liable for any amount unpaid on their shares and for liabilities expressly provided for in the Act — including the obligation to repay a distribution made when the company did not satisfy the solvency test under section 55. Section 318 is how a liquidator turns those into recoveries.
Sources
- Companies Act 1997 — ss 36, 55, 293, 294, 310, 311–318, 360, 404, 413, 426; 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.