Director Duties To The Liquidator

This guide is for individuals who want to understand Director duties to the Liquidator.

In this article you’ll learn about:

• The statutory duties of a Director to a Liquidator
• The requirement to answer questions
• What records a Director needs to hand over to the Liquidator
• And some more

Let’s get cracking.

Statutory Director Duties To The Liquidator

The statutory Director duties to the Liquidator ensure the Insolvency Practitioner can obtain the assistance and cooperation her or she requires. The Liquidator needs help.

The starting point of Director duties to the Liquidator involves handing over the records of the company.

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 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 property of the company that is in his or her control and afford details to the Liquidator of the company’s records and their location. This includes all forms of documents including all electronic records such as all email communications and any other form of electronic data.

Director Questionnaire Duty To Liquidator

As part and parcel of Director Duties to the Liquidator, he or she will usually be required to complete and return a Director’s Questionnaire seeking various factual information as requested by the Liquidator.

The purpose behind the Director’s questionnaire is usually to ease the information gathering process so that data at the fingertips of a Director can readily be provided to the Liquidator who will need the same for the day to day administration of the Liquidation of the company. It also helps to enable the Liquidator to address their obligation in respect of director conduct reporting in a Liquidation for the Insolvency Service.

Books And Records Duty

Why Directors need to keep company records? is to fulfil a core Directors’ duty to forward all books and records for a company to the Liquidator and ensure all computers holding its electronic data and the company’s software are delivered up. This includes relevant data relating to or belonging to the company held on personal or other computers not belonging to the company.

The Liquidator has a duty to obtain the company’s records. This is a fundamental responsibility as was set out in Dear Insolvency Practitioner 80:

It is important that an IP collects the books and records of a trading insolvent in order to support the integrity of the business environment and economy in the UK.

In addition, any of the company’s software, licenses and passwords needed to review any electronic data should be produced for the Liquidator.

The answer to the question what records must a company keep will often include depending on the nature of a company’s business:

1. Bank Accounts – statements, cheque stubs, paying slips.
2. Statutory books – minute book, company register.
3. Fixed Asset Register.
4. Stock-take(s).
5. Sales and purchase invoices, sales and purchases daybook and ledgers.
6. Payroll, employee, director and personnel records.
7. VAT returns.
8. Corporation Tax records.
9. All correspondence/contracts for the Company – sent and received.
10. Legal Records.
11. 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 when producing records.

The case of Keely v Bell [2016] EWHC 308 (Ch) (“Keeley”) involved Bankruptcy not the Liquidation of a company. Nevertheless, Mr Justice Norris made some notable comments about a Bankrupt’s obligations to his or her Trustee in Bankruptcy where records and cooperation were concerned. The principles appear consistent with a Director in a Liquidation given the obligations are similar in their mandatory nature. In Keely the Bankrupt was considered in breach of statutory obligations, having failed to do all that could reasonably be done to discharge the duty he had to the Trustee and 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)

Emails, Websites And Domain Names

Where there are email communications relating to a company’s affairs that have been conducted through personal email address(es), these should 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 Sections 216 and 217 of the Insolvency Act 1986 regarding the re-use of company names sets out the basic statutory provisions.

As a result any website in the name of the company that remains live must state that the company has entered Liquidation and in light of Section 188 of the Insolvency Act 1986 needs to contain a statement the company is being wound up. The website’s contact details should be amended to those of the Liquidator and Directors should hand over control of company websites accordingly.

Restriction On Re-Use Of Company Names

The provisions of Section 216 and 217 of the Insolvency Act 1986 are associated with so-called phoenix companies which involve the 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.

Identity Documents

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 a passport, driving licence and recent utility bills.