The Role Of The Liquidator

When a Limited Company enters liquidation, either through voluntary or compulsory means, a licensed insolvency practitioner (a liquidator) must be appointed to oversee the liquidation. During this process, there is often a great deal of confusion about what their role is, whose ‘side’ they are on and what powers they hold.

In these situations, it is extremely important to understand the process ahead of you and exactly what it could mean for your personal finances.

What is a ‘Liquidator’ and how are they appointed?

A Liquidator is a licensed insolvency practitioner (IP) who is appointed to oversee the full process of liquidating a limited company. They will be appointed when a company enters liquidation either through a voluntary liquidation agreed by the directors themselves or a compulsory liquidation forced by a creditor.

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

What does a Liquidator do?

A liquidator’s role is to oversee the company liquidation process. They will work to establish the company’s asset position and then sell or ‘realise’ these assets. The proceeds of any sales will then be used to pay off creditors.

Although a liquidator does not work directly for the creditor, their actions are there to benefit them. This is usually to the detriment of the directors and shareholders of the business.

What Powers Does a Liquidator Have?

The liquidator has the power to control and sell company assets, make transactions on behalf of the company and realise assets.

Further to this, the liquidator will investigate the finances of the company. If the company is insolvent before liquidation, this will include a more detailed investigation into certain aspects of the company’s financial history and the conduct of its directors. A report based on this investigation will be submitted to the Insolvency Service which may investigate further.

The liquidator has no powers of prosecution, but the Insolvency Service does. Directors could face financial and legal consequences if they are found to have acted irresponsibly or contributed to the insolvency of the company. You can read more about the potential impacts here.

Impact of Liquidation on Directors

As liquidation is a type of formal insolvency, your creditors will ask you to repay your debts. As mentioned above, the job of the liquidator is to use assets to pay off these creditors. However, there are a few instances where directors will be required to pay these debts:

• If you have signed a Personal Guarantee, the business debt essentially becomes a personal debt. You are fully liable and can face the same consequences (e.g. bankruptcy and repossession of assets). As this is classed as a default, you may also have additional fees and charges added to the original amount.
• If you borrowed from the business (known as a Director’s Loan Account), you will be asked to pay this back. This is treated as an asset of the company, so the liquidator will pursue the director(s) personally. This can also have several tax implications if handled incorrectly. Read more about Director’s Loans here.
• If you acted irresponsibly as a director, you could be made personally liable for business debts. This is particularly likely if you took a CBILS or BBLS as this will see you more closely investigated.

How are they paid?

Liquidators are paid based on the amount of work that they do during the liquidation process. This is usually either an hourly rate or based on the amount of assets realised. It can also be a fixed sum agreed before liquidation.

Usually, the fees are based on the complexity of the case and the amount of assets to be realised. As they are often not fixed, Liquidator’s fees can increase exponentially and can be very high.

If the directors appoint a liquidator, their fees will be firstly paid from company assets. However, if there are not sufficient assets, the Director will be responsible for settling the balance.

In a compulsory liquidation, directors are not required to pay the liquidator’s fees.

Worried about liquidation?

Bell & Company are unique in our approach to liquidation. 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. Read more about our approach to liquidation here.

Contact us today if you are worried about your company’s future or are considering appointing a liquidator. Our business specialists can conduct a full company health review and offer the best solutions for you and your business.

Call us on 0333 305 4331 or request a call back via the form on this page.