Duties of a Liquidator

john.han

Just wondering what are the consequences if a liquidator fails in their duties?
Say for example where a liquidator allows for a special interest rate to be given where the company has a loan as an asset, without any justification for the special arrangement? Surely this would be a breach of the liquidator's duty to realise the assets of the company?

Peregrinus

This is a complelex area. A liquidator's duties are owed to the company. There are various mechanisms for enforcing those duties and holding the liquidator to account, depending on whether the winding up is voluntary or involuntary, supervised by the court of by creditors, etc.

But, to cut to the chase, if the facts are you say, and in particuilar is there is "no justification" for the accommodation afforded to one creditor, there is recourse against the liquidator. In a real-world case, unlike the hypothetical we are discussing here, the liquidator would undoubtedly deny that the terms were favourable, or would offer explanation and justification for the favourable terms, and then the lawyers would coin it in the ensuing arguments.

john.han

Peregrinus wrote: »

This is a complelex area. A liquidator's duties are owed to the company. There are various mechanisms for enforcing those duties and holding the liquidator to account, depending on whether the winding up is voluntary or involuntary, supervised by the court of by creditors, etc.

But, to cut to the chase, if the facts are you say, and in particuilar is there is "no justification" for the accommodation afforded to one creditor, there is recourse against the liquidator. In a real-world case, unlike the hypothetical we are discussing here, the liquidator would undoubtedly deny that the terms were favourable, or would offer explanation and justification for the favourable terms, and then the lawyers would coin it in the ensuing arguments.

Thanks for your reply, are there specific sanctions listed anywhere or would it be a matter for those who lost out due to a failure by a liquidator to take civil action?

I'd find it hard to envisage how a liquidator could justify a preferential interest rate considering a company is being wound down, no chance of future business and if the creditor is someone of significant means there should be no problem with repayment.

hullaballoo

It's primarily a fiduciary role so the liquidator could find himself personally accountable for a breach of duties, if provable.

I can't think of many things other than criminal acts that would be within a liquidator's powers but outside his/her duties. Do you have a specific example of what you're thinking?

Edit: just to say I'm not doubting that there are ways in which a liquidator could breach his duties, just that my brain's on a go-slow maybe?

Peregrinus

john.han wrote: »

Thanks for your reply, are there specific sanctions listed anywhere or would it be a matter for those who lost out due to a failure by a liquidator to take civil action?

There are no specific sanctions. It's up to those who suffer by the (alleged) breach of duty on the liquidator's part to take action to prevent the breach of duty/recover their losses.

john.han wrote: »

I'd find it hard to envisage how a liquidator could justify a preferential interest rate considering a company is being wound down, no chance of future business and if the creditor is someone of significant means there should be no problem with repayment.

I'd hesitate to pass judgment until I heard the liquidator's account of what had gone on. You could speculate as to reasons which might justify it. E.g. there could be a dispute about the validity or enforceability of the loan, and a favourable interest rate might be part of a settlement which the liquidator judged to be in the best interests of creditors.

Carawaystick

the Irish times Made some specific allegations agaist the liquidators of Ceary's
That they were selling vouchers today(Monday) having liquidated the business on Friday last.

That's hardly kosher?

Mr. Incognito

Smells like the denis o brien saga

The answer is wait for the investigation.

Grolschevik

Carawaystick wrote:

the Irish times Made some specific allegations agaist the liquidators of Ceary's That they were selling vouchers today(Monday) having liquidated the business on Friday last.

As far as I know, that was just on their website. It'll be down to someone neglecting to turn off the 'shopping cart' feature probably.

And given that that person is probably now unemployed, it's a tad understandable.

Just so we are clear: there are no civil remedies listed against liquidators under the Companies Act. There are criminal penalties for certain actions but generally speaking the liquidator is responsible to one or more of the Court, the creditors or the members.

Section 608 of the Companies Act might be an interesting provision depending on the circumstances.

Oh and the Clery's voucher thing is 100% lolworthy. If anyone was dumb enough to buy a voucher I'd imagine they'll just be refunded immediately although for their silliness I'd be tempted to just list them as unsecured creditors and have done with it.

Carawaystick

S595 (4) might not have been complied with...

Carawaystick

Carawaystick wrote: »

S595 (4) might not have been complied with...

I think there's a degree of reasonableness involved here but I do think the particular section you refer to will develop into one of the very first things a liquidator does. That being said the primary duty of a liquidator is to secure the assets of the company and that would take precedence. If that, as it likely did, preoccupied the first day of operations then there is certainly reasonable excuse.

It is only a category 3 offence also and doesn't explicitly give rise to a civil cause of action.