bankruptcyinstruction

What is a Provisional Liquidator?

A provisional liquidator may be appointed after a petition to 'wind-up' a company has been presented to the court. This may be because there is concern that assets are at risk or because it is not in the 'public interest' for the company to continue trading. The assets and potential creditors are therefore protected until the court hears the winding-up petition. Alternatively, a provisional liquidator may be appointed to preserve a business until its financial affairs can be brought into order. The provisional liquidator will carry out duties as set out in the court's order in dealing with the company's assets and affairs.

Does the Company know a Provisional Liquidation Order will be made against them?

At  any time after a petition to 'wind-up' a company has been presented to the court, the court may appoint a Provisional Liquidator. Application for the appointment of a provisional liquidator may be made 'with notice' or 'without notice' to the company.

'With notice' means the Company Investigation Branch (CIB), on behalf of the Secretary of State, informs the company that it intends to apply to have the Official Receiver appointed as provisional Liquidator and why. This may bring a response from the company and they may enter into dialogue with CIB. 'Without notice' means that CIB applies to the court  without telling anyone, except the Official Receiver. This will happen where CIB consider that the company's business should be brought to the court's immediate attention, and there is a real  danger that assets will disappear if the company is made aware of the application, or that members of the public are suffering to such an extent that urgent action is required.

Ultimately, a High Court Judge will decide if a provisional liquidator is appointed.

Duties of the Official Receiver as Provisional Liquidator

During a provisional liquidation the Official Receiver carries out duties as set out in the court order. These duties vary depending on the company concerned but they usually involve:

1.Protecting assets
2.Safeguarding the company's records
3.Investigating the company's affairs only in so far as it is necessary to discover, protect and recover assets.

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 What happens after the Provisional Order has been made?

Public Interest Unit staff will carry out an inspection of the trading premises on the day the provisional order is made. This usually involves removing all the company's property from their premises and dismissing any staff they may employ, so effectively the company cease to trade. The Director(s) of the company will also be interviewed. The unit will then carry on out investigations necessary in order to protect assets and secure company records.

 What happens if the Petition to put the Company in Liquidation has been Dismissed?

The company will be returned to the control of the Director(s). All property will be returned to the trading premises and any assets that were being held by the Official Receiver will be released back to the company.

Winding-Up Orders

The Public Interest Unit receives two kind of 'winding-up orders'. Firstly, it deals with all cases where companies are wound-up in the public interest on the application of the Secretary of State (whether or not a provisional liquidator has been appointed beforehand). The court decides whether it is appropriate to wind-up a company on these grounds. Secondly, it deals with 'winding-up' of companies that have a unique nature or may attract national or international media attention.

Referred from: (http://www.insolvency.gov.uk/)