In general, a director cannot in effect just hand the keys to the liquidator and go on my merry way because a Liquidator enters office as a stranger.
Unlike the director, the Insolvency Practitioner does not have the director’s wealth of knowledge of the company at their fingertips. It cannot be assumed the Insolvency Practitioner will hoover this knowledge without some considerable assistance from the director(s).
This article was sparked by the following question in a post on ukbusinessforums:
Do I give the keys and computer logins to the IP and go on my merry way, or, how does it work?
Why Can I Not Just Hand The Keys To The Liquidator?
In cases of a well organised company with an informative set of company records in good order, the extent of the engagement between the Insolvency Practitioner and the director might not need to be so extensive but even in cases of a solvent members voluntary liquidation (as opposed to an insolvent creditors voluntary liquidation) now that HMRC clearance is no longer issued any more, the Insolvency Practitioner will generally need positive and prompt assistance from a director to clarify many items of information so the procedures can be properly complied with.
Commonly this will be done by the provision of questionnaires, meetings and provision of records so that in an insolvent liquidation (for example only) the Statement of Affairs and SIP 6 Report to Creditors can be assembled in a way required by the legislation and regulators.
Why Liquidation Is Not Merely Payment Of A Fee And Handing Over The Keys
Some directors may envisage a liquidation might happen by paying a fee to an Insolvency Practitioner and out sprouts the liquidation. It is often not quite so simple, even for a small company as there can be many features one needs to consider.
Liquidation is a formal legal procedure provided for under the Insolvency Act 1986 whereby the Liquidator once formally appointed acts instead of the Directors. The gateway to it is provided by the Company’s own Articles of Association. Those Articles can influence what is required in order to get the ball rolling.
Getting the company into liquidation can take a reasonably short period of time but will require the director’s assistance. Once into liquidation, the director’s involvement can be far less but it commonly requires the director to still cooperate with the liquidator when called upon to do so.
