Appointing an interim liquidator can preserve a company’s assets pending the court’s determination of whether the company should be placed into final liquidation. This prevents further deterioration of a company’s financial position thereby increasing the likelihood of successful debt recovery.
There are many reasons why it may be desirable to seek to have a company put into liquidation. The most common reason is that the company owes a client money. Another common reason is that the company has become unmanageable due to internal conflicts (particularly common with family owned companies). In cases such as this the client wishes for the company’s affairs to be wound up, and its assets realised and distributed by a liquidator.
Liquidation will enable a liquidator to realise the company’s assets and make a distribution to creditors including the client and, where the company is solvent, shareholders. The liquidator may also conduct an investigation into the company’s affairs. This can involve setting aside transactions under which the company has stripped itself of assets or seeking to recover funds from individual directors if the directors have breached their obligations to the company.
In order to address this problem it is possible to (and Chris has on several occasions done this successfully) have an “interim liquidator” appointed to preserve the company’s assets pending the Court’s determination of whether or not to place the company into final liquidation.
Such applications are typically brought on an urgent basis and without notice to the company.
An interim liquidator does not have jurisdiction to realise the company’s assets and make distributions to creditors. Nor does an interim liquidator have the powers to make the sort of investigations and take the sort of recovery actions available to a final liquidator. Nonetheless, interim liquidators do have considerable powers they can use in order to preserve the company’s assets pending the final liquidation of the company, including, if necessary, assuming control of the operation of a company’s business.