Insolvency

Both Peter and John have built up a strong reputation in the area of Insolvency over many years. We provide prompt commercial advice to directors of a Company who are encountering financial difficulty. We do not assume that insolvency proceedings are always inevitable, and we will examine all options available to a Company.

The economic down-turn in recent years saw Russell & Co. adapt to the changing landscape and re-invent the practice. This niche area still forms a major part of the practice.

 

What are Liquidations, Receiverships and Examinerships?

Liquidation – this process brings a company to a legal end. The company stops all activities, pays off its debts from any available
assets and winds up in an orderly way.

Receivership – this process is used by banks or other lenders to sell a company asset (such as a property) which was promised to
them if the company failed to repay its loan as agreed.

When a company is in receivership, its powers and the authority of its directors are suspended in relation to the assets that the
company gave as security for loans. The directors can only use those powers with the receiver’s permission.

Examinership – this process protects a company from its creditors (the people or companies to whom it owes money) while efforts
are made to keep it running as a going concern.

When a company is in examinership, its directors may continue to act as managers unless a court says they cannot. Examinership
lasts for about 70 days, and during that period:

■ a liquidator or receiver cannot be appointed to the company;
■ creditors cannot act to recover their debts without the court’s
consent; and
■ no one can take legal proceedings against the company
without the court’s consent.
This period gives the examiner time to see if the company can
be saved.

 

What is a Liquidation?

Liquidation is the process by which a company is brought to a legal end and the assets of the company are redistributed. The liquidation of a company involves the cessation of the company’s activities, the conduct of an investigation into the company’s affairs, the realisation of the company’s
assets, the payment of the company’s creditors to the extent possible (i.e. if there are sufficient funds) and, if having discharged the company’s debts there are any surplus funds, distribution of same to the members. The company is then dissolved, terminating its legal existence.

 

How are liquidators appointed?

Liquidators can be appointed by:
■ the members (owners);
■ creditors; or
■ the court

If the members appoint a liquidator, it is known as a voluntary liquidation. This type of liquidation usually involves a solvent
company – one that can pay its debts as they fall due.

If the creditors appoint a liquidator, it is called a creditors’ voluntary liquidation and the creditors as a group supervise the
liquidation. This type of liquidation involves an insolvent company – one that cannot pay its debts as they fall due.

If a court appoints a liquidator, it is called an official (or compulsory) liquidation. In this type of liquidation, the court
supervises the liquidation with the help of a specially appointed court officer. A creditor may ask the court to appoint a liquidator.

 

The Principal Role and Duties of Liquidators

 

The general role of both voluntary and Court appointed (official) liquidators are the same, in that,
both are involved in presiding over the winding-up of a company. A voluntary liquidator is an agent
of the company, while a Court appointed liquidator is, in addition, an officer of the Court and takes
his or her instructions from the Court.

Duty to Administer and Distribute the Company’s Property

A liquidator has a duty to administer and distribute the property of the company to which he or she
is appointed. This includes ascertaining the extent of the property of the company and as appropriate:
■ the collection and gathering in of the company’s property;
■ the realisation of such property; and
■ the distribution of such property in accordance with the laws.

 

The main duties of a liquidator are to:

■ take possession of the seal, books and records of the company, and all the property to which
the company is, or appears to be, entitled;
■ make a list of the company’s creditors and of the persons (known as contributories) who
are obliged to contribute to the assets of the company on its winding-up;
■ have any disputed cases adjudicated by the Court;
■ realise the company’s assets;
■ apply the proceeds in payment of the company’s debts and liabilities in proper priority and
in accordance with Section 617 Companies Act 2014;
■ distribute any remaining surplus amongst the members in accordance with their respective
entitlements.