A Liquidator Will Want To Bring Litigation That Has Good Prospects Of Success

Overview Of Where Does A Liquidator Recover The Money From For Creditors?

It is a common question of creditors that when a Liquidator or Insolvency Practitioner intends to bring insolvency litigation against Directors who may have breached their duty to a company or who are considered to have engaged in conduct such as Wrongful Trading; where is the Liquidator going to recover the money from for creditors?

It is not unusual for a Liquidator to receive information from Directors (either directly or indirectly) that may seek to discourage them from pursuing the legal action that is to be brought for the benefit of creditors as a whole.

It is the duty of the Liquidator to recover the company’s assets which might include legal claims against its Directors. It is not a risk-free position for a Liquidator to adopt because of the potential risks of being personally liable for adverse costs in litigation if a Liquidator brings claims in his or her own name. However, if a Liquidator is advised that the proposed litigation to be issued has merit and good prospects of success, then subject to funding issues being resolved, it should be brought to try to realise the company’s assets and return money to creditors.

A Liquidator should not and will not have an interest in bringing fruitless litigation that will not succeed and will not waste their time and those that they instruct, on such matters.

Litigation is typically a two-stage process in that you have to succeed in your action (or convince the proposed Defendant that you will or ought to do so) and then recover the money as a result. If there was no prospect of recovery of money then the action would typically not be brought because it would make no commercial sense to do so.

Facts And Not Speculation

A Liquidator therefore will typically research the position of the recovery before launching into litigation against Directors.

An Insolvency Practitioner will typically want to deal with facts as far as possible and maybe reluctant to entertain too readily matters of speculation.

The Liquidator may therefore often want to rely upon sources of information as to a Director’s ability to pay that are independent of the Director’s themselves. That might be so that the Liquidator can demonstrate to creditors that they did not rely upon the bare assertions of the party that had the direct financial interest in trying to convince the Liquidator not to pursue them and or who had a conflict of interest.

Seeking objectively reliable sources of information may lead to a Liquidator doing searches at Land Registry for Director’s property information, review of Companies House shareholding information and perhaps obtaining a sworn Statement of Means from the Director concerned.

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Disclaimer: Where Does A Liquidator Recover The Money From For Creditors?

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