Director Duties to the Liquidator
Director Duties to the Liquidator save where the Liquidator exercises his or her discretion differently are amongst other things generally as follows:
1. Statutory Duty
There is a mandatory statutory obligation pursuant to Section 235 of the Insolvency Act 1986 for a Director to co-operate with the Liquidator’s administration.
A Director should provide provide full details of all assets of the Company that are available to realise and full details of all property of the Company as at the date of Liquidation.
A Director should surrender all and any property of the Company that is in his or her custody and/or control and to afford details to the Liquidator of and location of any records held. This includes all forms of documents documents including all electronic records such as all email communications and any other forms of electronic data.
2. Director Questionnaire
Director Duties to the Liquidator. To complete and return a Director’s Questionnaire seeking various factual information as requested by the Liquidator.
3. Books and Records
Director Duties to the Liquidator. A Director should forward all books, papers and records for the Company to the Liquidator and ensure that all computers of the Company holding its electronic data, records and the Company’s software are delivered up, including the relevant electronic data relating to or belonging to the Company held on personal or other computers not belonging to the Company. In addition, any of the Company’s software, licenses and passwords needed to review any electronic data should be produced to the Liquidator.
A company’s records will often include, but not necessarily be limited to:
- Bank Accounts – statements, cheque stubs, paying slips.
- Statutory books – minute book, company register.
- Fixed Asset Register.
- Sales and purchase invoices, sales and purchases daybook and ledgers.
- Payroll, employee, director and personnel records.
- VAT returns.
- Corporation Tax records.
- All correspondence/contracts for the Company – sent and received.
- Legal Records.
- Computer/electronic records – pdf files, word, excel spreadsheets, emails etc.
Directors should be aware that such a duty will likely involve the need to be proactive. Although the case of Keely v Bell  EWHC 308 (Ch) (“Keeley”) involved a bankruptcy administration and not the liquidation of a company, Mr Justice Norris made some notable comments about a bankrupt’s obligations to his or her Trustee in Bankruptcy where records and cooperation was concerned. The principles appear transferrable because the obligations are similar in their mandatory nature where cooperation is concerned. Section 333 of the Insolvency Act 1986 for bankruptcy has similar cooperation obligations to those applicable to Directors duties to Liquidators in Section 235 of the Insolvency Act 1986. In the case of Keely the bankrupt was considered in breach of his statutory obligations, having failed to do all that could reasonably be done to discharge the duty he had to the Trustee in Bankruptcy. Mr Justice Norris said:
“A clear message must go to those who are made bankrupt that it is not sufficient to say “My computer is broken, I have lost some of my records. Others of my records are in store and I’m not sure where they are because other people can move them”. It is the duty of the bankrupt to provide the information which a trustee reasonably requires to discharge his duties to the creditors i.e. proper records (and in the absence of proper records, sufficient information supported by such material as is available) to enable the trustee to identify and take into his control all available assets and to identify all sources of potential benefit for creditors. It is the duty of the bankrupt to provide the material that is reasonably required for that purpose (whether the trustee can identify specific documents or not)“Mr Justice Norris in Keely v Bell
4. Emails, Websites and Domain Names
Where any email communications relating to the Company’s affairs and dealings have been conducted through personal email address(es), these should to be produced to the Liquidator if requested.
In respect of any website in the name of the Company full particulars including but not limited to the web address, details of the host, login details and any passwords should be provided to the Liquidator.
References below to Section 216 and 217 of the Insolvency Act 1986 regarding the reuse of company names should be noted. Any website in the name of the Company that remains live and published must state that the Company has entered liquidation and the website’s contact details should be amended to those of the Liquidator.
Section 188 of the Insolvency Act 1986 states that when a company is being wound up all the company’s websites must contain a statement that the company is being wound up. Directors should handover control of any of the Company’s websites to the Liquidator.
5. Identity Documents
Director Duties to the Liquidator. Directors generally should forward to the Liquidator a certified copy of relevant identity documents if this has not already been done at an earlier stage in the insolvency process or if the Liquidator has not been able to rely upon the same from other relevant sources. Documents needed will be evidence of address and to enable a relevant person to be identified. Typically such documents will need to be passport, driving licence and recent utility bills.
6. Restriction on re-use of Company Names
A director during the period of 12 months ending with the day before the Company went into liquidation is prohibited from using any name by which the Company was known, including any trading names, or a name which is so similar as to suggest an association with that Company.
The restriction from using a prohibited name applies for the period of 5 years beginning with the day on which the Company went into liquidation and except with the permission of the court such a Director cannot:
(a) be a director of any other company that is known by a prohibited name; or
(b) in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of any such company; or
(c) in any way, whether directly or indirectly, be concerned or take part in the carrying on of a business carried on (otherwise than by a company) under a prohibited name.
Attention is also drawn to Rules 22.1 to 22.7 of the Insolvency (England and Wales Rules 2016 which provides three exceptions to the restriction imposed by Section 216 of the Insolvency Act 1986.
It is a criminal offence to contravene Section 216 of the Insolvency Act 1986 and if a Director acts in contravention of this section they are liable on conviction to imprisonment and/or a fine.
Attention is also drawn to Section 217 of the Insolvency Act 1986, which provides, amongst other things, that a person who is involved in the management of a company in contravention of Section 216 of the Insolvency Act 1986 is personally liable for any debts of the Company incurred during the period of that involvement.
Sections 216 and 217 of the Insolvency Act 1986 and Rules 22.1 to 22.7 of the Insolvency (England and Wales Rules 2016 are enclosed for your convenience.
In the event that you are unclear about the effect/implications of Section 216 and 217 of the Act in relation to the restriction on re-use of company names, we recommend that you seek independent legal advice.
Disclaimer: No liability is accepted by Oliver Elliot Limited for any reliance placed upon the above. It is provided for information purposes only. It is not legal advice and should not be relied upon as such. In relation to the above you should consider the facts of your own case with an independent professional adviser.