Section 236 Insolvency Act 1986 Limit

Section 236 of the Insolvency 1986 is not an unlimited and unfettered power of a Liquidator.

Section 236 Insolvency Act 1986 Limit

Section 236 Insolvency Act 1986 Limit is a post that flows from the case of Re Akkurate Limited [2020] EWHC 1433 (Ch).

The Joint Liquidators wanted information from persons in the EU, in respect of dealings relating to a company in compulsory liquidation.

Although the case largely focused on matters of jurisidiction it also considered was whether or not Section 236 could be deployed to obtain information and documentation in relation to a company’s dealings after it had been wound up. The Court said:

“Generally, I accept that, although it is unusual to seek documents and accounts of dealings in relation to matters that occurred after the winding up, it is within the scope of section 236 insofar as the requests concern the business dealings affairs or property of the Company.“

The Court also said that the matter of obstructive behaviour might not have much of an effect as to the appropriateness of a section 236 order in this case.

The excercise of discretion to make the order albeit in more restrictive terms than applied for referred to the following:

“In B&C, the House of Lords upheld the grant of an order under section 236(3). Lord Slynn explained the appropriate approach as follows at pages 239-240:

“I am therefore of the opinion that the power of the court to make an order under section 236 is not limited to documents which can be said to be needed ‘to reconstitute the state of the company’s knowledge’ even if that may be one of the purposes most clearly justifying the making of an order.

At the same time it is plain that this is an extraordinary power and that the discretion must be exercised after a careful balancing of the factors involved – on the one hand the reasonable requirements of the administrator to carry out his task, on the other the need to avoid making an order which is wholly unreasonable, unnecessary or ‘oppressive’ to the person concerned. The latter was stressed by Bowen L.J. in In re North Australia Territory Co., 45 Ch.D. 87, 93: …

Such an approach was stressed more recently by Brightman J. in respect of oral examination in In re Bletchley Boat Co. Ltd. [1974] 1 W.L.R. 630 .

The protection for the person called upon to produce documents lies, thus, not in a limitation by category of documents (‘reconstituting the company’s state of knowledge’) but in the fact that the applicant must satisfy the court that, after balancing all the relevant factors, there is a proper case for such an order to be made. The proper case is one where the administrator reasonably requires to see the documents to carry out his functions and the production does not impose an unnecessary and unreasonable burden on the person required to produce them in the light of the administrator’s requirements. An application is not necessarily unreasonable because it is inconvenient for the addressee of the application or causes him a lot of work or may make him vulnerable to future claims, or is addressed to a person who is not an officer or employee of or a contractor with the company in administration, but all these will be relevant factors, together no doubt with many others“.

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