Liquidator Duty To Realise The Assets

Overview Of Liquidator Duty To Realise Assets

It is a fundamental Liquidator duty to realise the assets of a company in Liquidation. 

The duty extends to both disclosed and undisclosed assets.

When it comes to matters of negligence then it is likely a Liquidator will be materially less at risk to suggestions of neglect where undisclosed assets as opposed to disclosed assets are concerned.

Directors direct a company but Liquidators liquidate a company.

Understanding Liquidator Asset Realisation Duty

Liquidation is the process that enables a Limited Liability Company to be properly wound up in accordance with the provisions set out in the Insolvency Act 1986. 

Ordinarily, a company’s assets are part of its tools of trade. Once a company goes into Liquidation it will cease trading. Its assets are no longer therefore used to trade to generate income but instead need to be sold to realise cash.

If the assets are not realised then the assets of a company dissolved are Bona Vacantia. Their value is then lost to shareholders or in the case of an insolvent company to creditors.

The role of the Liquidator is to do all things required to complete the winding up of the company for the benefit of creditors and shareholders. This is set out in Section 107 of the Insolvency Act 1986 in the case of Voluntary Liquidation and Section 143 of the Insolvency Act 1986 in Compulsory Liquidation. 

To wind up a company its ongoing matters such as assets, liabilities and tax affairs need to be finalised.

Secured creditors may have certain priority rights to the company’s assets such as those with a fixed or floating charge.

Valuation Of Assets

A Liquidator must not only realise the assets but in it inherent that the duty is to maximise the realisations subject to consideration of the costs.

In order to do so he or she will need to have some idea of their value. As a result, they will typically instruct an independent valuation expert to provide a report as to the market value of the assets. Typically such agents will be experienced in not only asset valuation but also finding a suitable route to market their disposal.

Reporting On The Realisation Of Assets Liquidator Duty

Once a Liquidator has realised the assets then in an annual Progress Report the Liquidator must account to the creditors and the shareholders for the progress made towards winding up the company.

Such a report will include details of all receipts and payments made by the Liquidator in the period being reported on showing how much money was expended in the process of realising the assets and what was ultimately obtained for them.

This will enable shareholders and creditors to see what they could anticipate to receive from the Liquidation in due course.

Undisclosed Assets and Investigations

The job of the Liquidator is to look to realise all of the assets. Investigations should be undertaken to consider what assets could be obtained in addition to those disclosed by the Directors.

Typically a Liquidator will consider recent years filed accounts at Companies House and where appropriate make suitable enquiries of the Directors. This is particularly the case where any unaccounted for assets might be suspected and need to be investigated.

In the event that further assets belonging to the company in Liquidation are then discovered the Liquidator will typically need to consider what to do to bring them within his or her control. This may involve taking legal advice and instructing lawyers to set about issuing legal proceedings to recover them.