Liquidation in UK Law

If the creditor petitions to wind up a company, or claims in a liquidation initiated by others, he is not engaged in proceedings to establish the company's liability or the quantum of the liability (although liability and quantum may be put in issue) but to enforce the liability. The liquidation of an insolvent company is a process of collective enforcement of debts for the benefit of the general body of creditors.

Expenses incurred after the liquidation date need no further equitable reason why they should be paid. It is not the business of the liquidator to incur expenses for any other purpose. There would be little point in a statute which specifically imposed liabilities upon a company in liquidation if they were payable only in the rare case in which it emerged with all other creditors having been paid.

And in Re HH Realisations Ltd (1975) 31 P & CR 249 the company remained in occupation for some time after the rent had ceased to be a liquidation expense. The rates would have been an obligation incurred after the liquidation which (unlike the rent) was not provable and was therefore payable in full.

In the first place, the question of whether the community charge should count as an expense of the liquidation was not a matter for the judge's discretion. In depended upon whether it came within one of the paragraphs of rule 4.218. The liability did not arise out of a pre-liquidation obligation. If it came within the language of paragraph (m), it was a liquidation expense.

There are, as I see it, a number of serious difficulties with this submission. First, on a natural reading of 2.88(7) it applies to a surplus in the hands of the administrator rather than in the hands of a subsequent liquidator. Read in its context, it seems to direct the administrator as to the application of the surplus which he holds.

That principle requires that English courts should, so far as is consistent with justice and UK public policy, co-operate with the courts in the country of the principal liquidation to ensure that all the company's assets are distributed to its creditors under a single system of distribution.

On the other hand, if a liquidator has been generally effective and honest, the court must think carefully before deciding to remove him and replace him. It should not be seen to be easy to remove a liquidator merely because it can be shown that in one, or possibly more than one, respect his conduct has fallen short of ideal.