Liquidation in UK Law

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.

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.

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 one hand the court expects any liquidator, whether in a compulsory winding up or a voluntary winding up, to be efficient and vigorous and unbiased in his conduct of the liquidation, and it should have no hesitation in removing a liquidator if satisfied that he has failed to live up to those standards at least unless it can be reasonably confident that he will live up to those requirements in the future.

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. Further, the court has to bear in mind that in almost any case where it orders a liquidator to stand down, and replaces him with another liquidator, there will be undesirable consequences in terms of costs and in terms of delay.