If a winding-up order has been granted by the court, the Official Receiver (OR) in the role of a provisional liquidator appointment plays an integral role in corporate liquidations in the initial stages as well as throughout. Not only is the OR an officer of the court, but they also work for the Insolvency Service. This article explains Official Receiver Duties.
The Official Receiver acts can change with each corporate liquidation case, but their general role is to oversee such cases and investigate the financial affairs and the company’s failure. Although the Official Receiver is appointed in instances of compulsory liquidation, they may not always conduct the entire process. In some cases, they enable the appointment of an independent liquidator after completing the initial stage.
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The Official Receiver’s role as provisional liquidator
The Official Receiver can also act as a provisional liquidator if there is a possibility that the company directors will deprive creditors of liquidation funds. This often happens when they conceal or dispose of company assets.
In this instance, the Official Receiver would safeguard the assets and make sure that any creditors don’t experience additional financial woes. A provisional liquidator can be selected by the court on an emergency basis after a winding-up petition has been submitted but before the actual court hearing.
Taking control of the insolvent company
When appointed, the Official Receiver is in charge of every part of the company, like the company creditors, safeguarding company assets, contracts, and leases. Business assets are sold to raise money for creditors, and funds are given out according to how important the creditor is.
Not only does this discuss the corporate liquidation process, but it also covers the Official Receiver’s job of investigating a company director’s actions before their insolvency.
Provisional liquidator investigations
The Official Receiver must investigate the reasons for a company’s failure when it is forced into liquidation. They will try to determine director conduct and if any wrongdoing occurred which could have contributed to its collapse.
The fact that a creditor had to force the company into liquidation is an initial concern, instead of directors proactively placing their business into liquidation once they knew it couldn’t be rescued.
One of the Official Receiver functions is to interview directors and determine what series of events occurred before insolvency. This protects creditors and others from possible financial loss.
Companies can also make enquiries with individuals and institutions associated with the company, such as the bank and the company’s accountants. Investigators will typically look into:
If a company is having difficulty paying its bills as they come due, or the value of its liabilities exceeds that of its assets, directors must immediately stop trading in order to protect creditors from financial harm. If they fail to do so, they could be accused of wrongful trading.
Priority payments are those that give an unfair advantage to one creditor over others. An example of a priority payment would be repaying a loan to a family member or paying off creditors’ loan that has some form of personal guarantee attached.
Transactions at undervalue
If a court finds that directors have sold business assets for less than their true value in the two years leading up to insolvency, the Official Receiver may ask the court to reverse those transactions.
If you need advice from our in-house insolvency practitioner, don’t hesitate to contact us by leaving an enquiry on our website or calling us on 0800 169 1536.