The recent liquidation of Centaur Litigation, an international Ponzi scheme, has highlighted the extensive powers given to both voluntarily and involuntarily appointed liquidators.
In Australia, the powers and procedures concerning liquidators are set out in the Corporations Act (“the Act”).
Who may appoint a liquidator?
A liquidator may be appointed either voluntarily or involuntarily. A company can voluntarily appoint a liquidator at a general meeting for the purpose of winding up the affairs and distributing the property of the company: section 495 of the Act. Voluntarily appointing a liquidator may allow the company to fix the remuneration to be paid to the liquidator.
On the other hand, the Court has the power to involuntarily appoint an official liquidator if an order is made for the winding up of a company. The court can also appoint an official provisional liquidator at any time after the filling of a winding up application and before the making of a winding up order: section 472 of the Act.
What happens once a liquidator has been appointed?
Once a liquidator or a provisional liquidator has been appointed they must take all of the company’s property into their custody or under their control. This includes property that appears to the liquidator to be the property of the company: section 474 of the Act.
The directors and secretary of the company at the date of the winding up may then be required to provide a written report that details the affairs of the company as at the date concerned. The liquidator may also require additional people to provide a written report containing specified information about the company. These additional people include someone who was an officer or employee of the company: section 475 of the Act.
Once the liquidator has received these reports, they must lodge a preliminary report to the Court within 2 months. Under section 476 of the Act, this report should include:
(a) in the case of a company having a share capital—the amount of capital issued, subscribed and paid up; and
(b) the estimated amounts of assets and liabilities of the company; and
(c) the company has failed—as to the causes of the failure; and
(d) in his or her opinion, whether further inquiry is desirable with respect to a matter relating to the promotion, formation or insolvency of the company or the conduct of the business of the company.
If the liquidator has been voluntarily appointed, they must cause a meeting of the company’s creditors to be convened within 11 days after the day of the meeting of the company at which the resolution for voluntary winding up is passed. The liquidator must give creditors at least 7 days notice of this meeting and provide each creditor with a summary of the affairs of the company and a list setting out the names of all of the company’s creditors.
What are the liquidator’s powers?
As was noted above, liquidators are given extensive powers to ensure that the rights and interests of those involved are protected. Section 477 of the Act provides an extensive list of the powers given to liquidators, including to:
- carry on the business of the company so far as is necessary for the beneficial disposal or winding up of that business;
- subject to the provisions of section 556, pay any class of creditors in full;
- make any compromise or arrangement with creditors or persons claiming to be creditors or having or alleging that they have any claim against the company or whereby the company may be rendered liable;
- bring or defend any legal proceeding in the name and on behalf of the company;
- appoint a solicitor to assist him or her in his or her duties;
- sell or otherwise dispose of all or any part of the property of the company;
- obtain credit, whether on the security of the property of the company or otherwise;
- appoint an agent to do any business that the liquidator is unable to do, or that it is unreasonable to expect the liquidator to do, in person;
- do all such other things as are necessary for winding up the affairs of the company and distributing its property; and
- inspect at any reasonable time any books of the company and a person who refuses or fails to allow the liquidator to inspect such books at such a time is guilty of an offence.
The Court may issue a warrant if it is satisfied that a person has concealed or removed property of the company that results in the liquidator being prevented or delayed from carrying out their duties: section 530C of the Act. Additionally, the liquidator has the power to commence prosecution of delinquent company officers and members in certain situations.
Andrew Fletcher has completed the Australian Restructuring Insolvency & Turnaround Association (ARITA) run Insolvency Education Program, is a current member of ARITA and is qualified to provide advice in relation to restructuring, turnaround and insolvency.
If you would like any further information or require assistance please get in touch with Andrew on 1300 292 700, or use our Legal Enquiry Form to submit an enquiry online or after hours.
For further information on the Centaur Litigation liquidation, see the following article written by the Sydney Morning Herald’s business reporter Ben Butler: Liquidators hunt for alleged Centaur Litigation Ponzi scheme boss Scott Williams
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