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Can a liquidator really compel me to do this?

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Posted by Steve Halkett on 18 June 2015

Steve Halkett - Corporate Law Solicitor
Steve Halkett Partner

The Insolvency Act 1986 gives liquidators and administrators (‘Office Holder’) wide ranging powers to collect in the assets of an insolvent company.  If you refuse to hand over property in your possession, such as assets, books, papers or records, to the Office Holder who reasonably believes it belongs to the company, they can compel you to do so by requesting a Court order to ensure that you do surrender the property.

Duty to co-operate

The Office Holders have a duty to enquire into a Company’s dealings and in so doing, will question anyone who is connected with the insolvent company who is suspected, or known, to have in their possession any property of the Company. This includes debtors and anyone else who might be capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the Company.  If any of the individuals questioned refuse to co-operate voluntarily, the Office Holder can apply to a Court to compel the relevant person to appear before the Court or to provide a Witness Statement verified by a Statement of Truth in respect of the information/assets/property which form the subject matter of the Office Holder’s enquiries.

The Court has the power to issue a warrant for the arrest of an uncooperative individual and to order seizure of any books, papers, records, money or goods in that person’s possession.  In the more extreme circumstances, they might be kept in custody pending a satisfactory resolution of the issues raised. 

List of people required to co-operate can be long

The fact that an Office Holder invariably comes in “cold” into an insolvency situation, is reflected in the nature and extent of the enquiries that will be made.  In order to allow the Office Holder to carry out the duties required, the Insolvency Act 1986 provides for a fairly extensive list of people whom the Office Holder may question and they have a duty to co-operate in that regard.

In this respect, an Office Holder will want as much information as possible relating to the company and its promotion, formation, business, dealings, affairs or property in order to carry out their function.  An Office Holder can insist on the attendance of anyone, along with any information they hold.

The list of people required to co-operate is fairly broad and includes:

  • Those who are or have been at any time officers of the company;
  • Those who have taken part in the formation of the company at any time within the year before the insolvency event;
  • Employees of the company or previous employees and even those engaged under a contract of services for the Company within that year and which the Office Holder considers will have relevant information.
  • Another company’s officers and employees and previous officers and previous employees who serve or served the company in the year prior to the insolvency event. 

Claiming expenses for co-operating

It goes without saying that people affected by these broad range enquiries might incur expense in terms of time and effort in seeking to comply in full with the Office Holder’s requests and might think they have a reasonable case for obtaining compensation for helping out.  However, as a general rule, the person “co-operating” will not be compensated.  Whilst the Court has a general discretion to award costs, in a recent case in respect of an Office Holder’s Company’s dealings, the Court held that, by and large, the provision of the information requested amounted to a “public duty” and no costs would be awarded.

For those thinking that an administration or liquidation brought matters to a conclusion, for a wide range of people, the aggravation and disruption could be going on for a fair bit longer than might otherwise have been expected.

About the author

Steve is a partner in the corporate team who specialises in transactional work.

Steve Halkett

Steve is a partner in the corporate team who specialises in transactional work.

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