The Misconceptions of a ‘Friendly Liquidator’

In the complex world of company liquidation, the term ‘Friendly Liquidator’ often appears, suggesting a smooth and director-friendly liquidation process. But what exactly is a ‘Friendly Liquidator’, and how does this concept align with the realities of liquidation? This article aims to provide clarity on the term and give a clear understanding of what business owners can expect when a liquidator is appointed over their insolvent company.

What Is a Liquidator and How Are They Appointed?

A licensed Insolvency Practitioner (IP), known as a Liquidator, oversees the entire process of liquidating a limited company. The appointment of a liquidator occurs when a company enters liquidation, either through the directors’ agreement in a voluntary liquidation or by a creditor’s enforcement in a compulsory liquidation.

In the case of voluntary liquidation, the company’s directors can appoint their own Liquidator. However, in a compulsory liquidation situation, the creditor appoints the Liquidator. Regardless of who appoints them, their role and responsibilities remain unchanged.

What is a ‘Friendly Liquidator’?

A ‘Friendly Liquidator’ is perceived as a Liquidator who promises an easy-going and trouble-free liquidation process, appearing to align closely with the directors’ interests. This term can be quite misleading as it suggests a level of personal support that may not reflect the Liquidator’s actual role and responsibilities.

Despite its comforting image, the term ‘Friendly Liquidator’ refers to a professional bound by the same duties and responsibilities as any other Liquidator. Their primary obligation is to recover as much money from the company assets for the repayment of the creditors, from which they will receive a fee. In simple terms, the more money they recover for the creditors, the more money they make. Therefore, regardless of how ‘friendly’ the liquidator is, they will not hesitate to take actions detrimental to the director if it means recovering more money for the creditor.

How a Liquidator Can U-Turn

We have worked with several clients who were under the impression they were hiring a friendly Liquidator. However, once appointed, the Liquidator took extreme action against them. Here are a couple of examples of the actions that they took:

• Issuing property inhibitions complicating the sale of assets. This action aimed to secure the assets, ensuring that proceeds from any sale would directly repay creditors.
• Making overstated claims on Directors Loan Accounts based on incomplete accounting records. In an attempt to pursue the director on a personal basis.
• The liquidator knew our client was a director of other solvent companies, so they tried using them as leverage in the liquidation process.
• Acquiring litigation funders, who have a large backing of funds. This was done so that they could be more aggressive in their recovery methods.

What Are The Alternatives?

At Bell & Company, we emphasise the importance of clear, realistic advice when dealing with Liquidators. Our team will identify any issues and present you with viable solutions to resolve them. Our primary objective is to equip you with a thorough understanding of the implications and ramifications of liquidation. Thus enabling you to make an informed decision on whether liquidation is the right option for your company.

Our approach to liquidation is unique compared to many in our industry. We are not Insolvency Practitioners, so you’ll always have peace of mind knowing that we are always on your side and always act in your best interest. We will explain the nuances of the process to you clearly and concisely. Just get in touch today for your free initial case review.