Given the level of liquidations that are occurring at present the question of liquidators powers is an issue where we are regularly providing advice to clients.
One particular power of liquidators is the power under section 261 of the Companies Act 1993 to require production of various company documents.
The powers are extremely wide and often the question that we are asked is who is obliged to comply with these notices and what documentation has to be provided.
Most people appreciate that a liquidator can request anyone who has possession of company documentation to provide that documentation to the liquidator. However, one issue that is less understood is that this power can extend beyond the company’s own documentation.
This is often raised as a basis for resisting an initial notice from the liquidator to provide this documentation. While technically section 261 only applies to the company’s documents in the possession of the person receiving the notice what is less understood is that there are provisions in the Companies Act (section 266) which give the liquidator the power to apply to the Court for an order that other documentation that is not the company’s documentation be supplied if it is relevant to the liquidation and necessary for the liquidator’s purposes.
The Courts have indicated that this discretion is to be exercised carefully, but nevertheless it has become apparent that the Courts will give a robust consideration to what is necessary for the liquidator in the conduct of the liquidation.
There have been cases where company accountants have attempted to resist such applications on the basis that the documentation is the property of the accountants and it has been prepared by the accountants in completion of its role in respect to the company but the documentation does not belong to the company. In addition the accountants have argued that provision of the information will cause considerable inconvenience and costs to the accountants to supply. These arguments have not found favour with the Courts and indeed the Courts have said that costs and inconvenience itself does not make the request for the information unreasonable.
When receiving notices from liquidators it is important that you treat them with caution and also give them the attention they deserve. We regularly advise clients who are caught up in company liquidations and in particular where there are notices received in the context of production of documentation or examination by the liquidators.
We have extensive experience in all aspects of insolvency including liquidations and can advise you in regard to these matters.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:
Paul Farry
09 379 0055 or 03 477 8870
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.