If you are a creditor of an insolvent company or a bankruptcy, Oliver Elliot can help you address your concerns arising from the insolvency and explain how liquidator investigation powers can help.
Insolvency Practitioner Investigation Powers
What are the Liquidator’s investigation powers?
Liquidator investigation powers are as follows:
Section 234 of the Insolvency Act 1986 is the Section that enables an Insolvency Practitioner to demand delivery up of property belonging to the insolvent company when acting as Liquidator and or Administrator. Sections 234, 235 and 236 of the Insolvency Act 1986 are all interlinked.
Section 234 of the Insolvency Act 1986 can be used by the Insolvency Practitioner to demand property from anyone having the insolvent company’s (one applicable to Liquidation or Administration in this scenario) assets and or documents such as its books, papers and records which would be relevant to the insolvent company’s financial affairs. The Section has mandatory characteristics because it would be unusual for the Insolvency Practitioner to be unable to take into his or her possession all and any property of the insolvent company.
Getting in the company’s property.
(1)This section applies in the case of a company where—
(a)the company enters administration,
(b)an administrative receiver is appointed, or
(c)the company goes into liquidation, or
(d)a provisional liquidator is appointed;
and “the office-holder” means the administrator, the administrative receiver, the liquidator or the provisional liquidator, as the case may be.
(2)Where any person has in his possession or control any property, books, papers or records to which the company appears to be entitled, the court may require that person forthwith (or within such period as the court may direct) to pay, deliver, convey, surrender or transfer the property, books, papers or records to the office-holder.
(3)Where the office-holder—
(a)seizes or disposes of any property which is not property of the company, and
(b)at the time of seizure or disposal believes, and has reasonable grounds for believing, that he is entitled (whether in pursuance of an order of the court or otherwise) to seize or dispose of that property,
the next subsection has effect.
(4)In that case the office-holder—
(a)is not liable to any person in respect of any loss or damage resulting from the seizure or disposal except in so far as that loss or damage is caused by the office-holder’s own negligence, and
(b)has a lien on the property, or the proceeds of its sale, for such expenses as were incurred in connection with the seizure or disposal.
Section 235 of the Insolvency Act 1986 is the Section that enables an Insolvency Practitioner to obtain information from an insolvent company’s (one applicable to Liquidation or Administration in this scenario) former officers and agents who have acted on its behalf by creating a duty to cooperate. Sections 234, 235 and 236 of the Insolvency Act 1986 are all interlinked.
Section 235 of the Insolvency Act 1986 can be used to obtain information from such parties having information relevant to the insolvent company’s financial affairs that the Insolvency Practitioner reasonably requires. The Section is mandatory because former officers and agents who have acted on behalf of the insolvent entity have a duty to cooperate with the Insolvency Practitioner.
Duty to co-operate with office-holder.
(1)This section applies as does section 234; and it also applies, in the case of a company in respect of which a winding-up order has been made by the court in England and Wales, as if references to the office-holder included the official receiver, whether or not he is the liquidator.
(2)Each of the persons mentioned in the next subsection shall—
(a)give to the office-holder such information concerning the company and its promotion, formation, business, dealings, affairs or property as the office-holder may at any time after the effective date reasonably require, and
(b)attend on the office-holder at such times as the latter may reasonably require.
(3)The persons referred to above are—
(a)those who are or have at any time been officers of the company,
(b)those who have taken part in the formation of the company at any time within one year before the effective date,
(c)those who are in the employment of the company, or have been in its employment (including employment under a contract for services) within that year, and are in the office-holder’s opinion capable of giving information which he requires,
(d)those who are, or have within that year been, officers of, or in the employment (including employment under a contract for services) of, another company which is, or within that year was, an officer of the company in question, and
(e)in the case of a company being wound up by the court, any person who has acted as administrator, administrative receiver or liquidator of the company.
(4)For the purposes of subsections (2) and (3), “the effective date” is whichever is applicable of the following dates—
(a)the date on which the company entered administration,
(b)the date on which the administrative receiver was appointed or, if he was appointed in succession to another administrative receiver, the date on which the first of his predecessors was appointed,
(c)the date on which the provisional liquidator was appointed, and
(d)the date on which the company went into liquidation.
(5)If a person without reasonable excuse fails to comply with any obligation imposed by this section, he is liable to a fine and, for continued contravention, to a daily default fine.
Section 236 of the Insolvency Act 1986 is the enforcement section that enables an Insolvency Practitioner to obtain information. Sections 234, 235 and 236 of the Insolvency Act 1986 are all interlinked.
Section 236 of the Insolvency Act 1986 can be used to obtain information from anyone having information relevant to the insolvent company’s (one applicable to Liquidation or Administration in this scenario) financial affairs. It cannot however be used by the Insolvency Practitioner oppressively or to put the insolvent entity in a better position that it would have been were it not for the insolvency. This is particularly the case if the insolvent entity has competing interests with an independent party from whom the information is sought.
Inquiry into company’s dealings, etc.
(1)This section applies as does section 234; and it also applies in the case of a company in respect of which a winding-up order has been made by the court in England and Wales as if references to the office-holder included the official receiver, whether or not he is the liquidator.
(2)The court may, on the application of the office-holder, summon to appear before it—
(a)any officer of the company,
(b)any person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or
(c)any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company.
(3)The court may require any such person as is mentioned in subsection (2)(a) to (c) to submit to the court an account of his dealings with the company or to produce any books, papers or other records in his possession or under his control relating to the company or the matters mentioned in paragraph (c) of the subsection.
(3A) An account submitted to the court under subsection (3) must be contained in—
(a)a witness statement verified by a statement of truth (in England and Wales), and
(b)an affidavit (in Scotland).
(4)The following applies in a case where—
(a)a person without reasonable excuse fails to appear before the court when he is summoned to do so under this section, or
(b)there are reasonable grounds for believing that a person has absconded, or is about to abscond, with a view to avoiding his appearance before the court under this section.
(5)The court may, for the purpose of bringing that person and anything in his possession before the court, cause a warrant to be issued to a constable or prescribed officer of the court—
(a)for the arrest of that person, and
(b)for the seizure of any books, papers, records, money or goods in that person’s possession.
(6)The court may authorise a person arrested under such a warrant to be kept in custody, and anything seized under such a warrant to be held, in accordance with the rules, until that person is brought before the court under the warrant or until such other time as the court may order.
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