Upon a winding up, howsoever occasioned, the powers of the directors are suspended and these are undertaken by the liquidator. The role of the liquidator is a pivotal one, effectively ensuring closure of the company’s corporate existence, whilst seeking to preserve the interest of creditors and third parties. Although the Companies Act clearly identifies the liquidator as the central figure, there are a number of secondary, but equally important figures which play an important role in the winding up of a company.
Appointed by the Minister of Justice, the role of the official receiver is to act as the liquidator of companies being wound up by Court. Companies are obliged to inform the official receiver of a number of facts as soon as they are put in liquidation by a Court or law e.g. - the statement of the company’s affairs is to be submitted to the official receiver within 21 days.
The official receiver, shall, as soon as practicable after receipt of the statement, submit a report to the Court, or carry out investigations as he may deem appropriate and submit a preliminary report to the court (regarding assets and liabilities, causes for failure of the company, and whether in his opinion there has been fraud committed by any person) or similar wrongdoing.
The need to appoint a provisional administrator may arise where there is a lenghty period between the filing of a winding up application and the handing down of a winding up order. In this interim period, when a liquidator would not yet have been appointed, the Court may deem it expedient to appoint a provisional administrator not only to ensure swift handling of the winding up, but to preserve the interests of third parties, especially since the role of the directors is effectively marginalised upon a winding up.
The provisional administrator as the name implies is a stop-gap function i.e. undertaken within the parameters set forth by the Court, and shall only hold office until a winding up order is given (when a liquidator is appointed) or until the winding up application is dismissed.
By far the central figure in a winding up, the role of the liquidator is a pivotal one. The liquidator, may as set forth above, be appointed by the Court, by the creditors or by the shareholders of the company. In carrying out his duties, the liquidator is usually granted the power to carry out a wide number of powers, all of which stem from the corresponding Article 238 of the Companies. The most salient powers allowed to the liquidator are as follows:-
to carry on the business of the company so far as may be necessary for the beneficial winding up thereof;
to pay creditors according to their ranking at law;
to make any compromise or arrangement with creditors, and to refer any such matter to arbitration;
to represent the company in all matters and to do all such things as may be necessary for winding up the affairs of the company and distributing its assets:
Special powers may be afforded to the liquidator, especially in the case of a winding up by the court, whereby, the liquidator, shall in addition to the powers set forth above, also have the power:-
to sell the movable and immovable property,
to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts and other documents;
to raise on the security of the assets of the company any money requisite;
to appoint a mandatory to act for him in his capacity as liquidator for particular purposes.
Custody and control of the property of the Company
Article 237 of the Companies Act, gives the liquidator the power to ‘take into his custody or under his control all the property and all rights to which he has reasonable cause to believe the company to be entitled.’ – this is a central power, since effectively, the directors of the company are divested from their office, and have only a residual function in the company, mainly to liaise with the liquidator, in the carrying out of this roles and duties.
For the better doing of his function, the liquidator may summon general meetings of the creditors or contributories for the purpose of ascertaining their wishes, and it shall be his duty to summon meetings at such times as the creditors or contributories, by resolution, either at the meeting appointing the liquidator or otherwise, may direct, or whenever requested in writing to do so by one-fourth in value of the creditors or contributories, as the case may be.
As an added safety-feature in ensuring the protection to creditors, Article 245 of the Companies Act prescribes that upon a winding up ordered by the court, the creditors, may determine whether to appoint a liquidation committee to act with the liquidator . The role of the investment committe is to monitor the duties of the liquidator. Composed by three (3) to five (5) individuals, the role of the liquidation committee shall be to liaise with liquidator by means of meetings held every six (6) months or such higher frequency, as the liquidator may deem adequate. The majority of the committee must be present for a meeting ot have been duly convened, and decisions shall be taken by majority voting.
A member of the committee may resign by notice in writing signed by him and delivered to the liquidator. Where a member is vacant for five (5) consecutive meetings of the committee without the leave of those members who together with himself represent the creditors or contributories, as the case may be, his office shall thereupon become vacant. Furthermore, the member of the committe may be removed by a resolution of a meeting of the creditors, if he represents creditors, or by a resolution of a meeting of the contributories, if he represents contributories.
Pursuant to the winding up application but prior to the making of a winding up order, the Court may, at its discretion, appoint a provisional administrator to manage the company. Following the winding up order, the liquidator is appointed, to carry on his function from that moment in time. Admittedly rare, the appointment of special managers are usually appointed when the company being wound up, is engaged in a niche of highly specialised business, that involves specialised skills e.g. credit insitution or financial services.
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