Office holders Powers part 1

We will soon be considering some of the specific sections under which in liquidation return of property or other relief can be sought. However before looking at those it is useful to understand that some of the powers which officemholders have in order to find out the information they need to have in order to exercise those powers.

The first section to consider is section 234 of the Insolvency Act 1986 ("the Act"). This deals with a number of different situations. The company going into liquidation is one, but the appointment of a provisional liquidator and administrative receiver or the company going into administration are others. The office holder is the relevant office holder by reference to the type of insolvency scenario which occurs. It can be respectively the liquidator, the provisional liquidator, the administrative receiver or the administrator.

This section effectively deals with two different matters. However they largely relate to the same subject matter. That is property, books, papers or records of the company. What is being looked at is the need for the office holder to get hold of such property and documents. The reason for this is obvious. An office holder who does not have the relevant documents of the company is unlikely to have much chance of getting to the bottom of what went wrong and why and whether anyone should properly be held to account for such failures.

What section 234 does is give a summary procedure for the court to order books papers property etc to be delivered up forthwith to the office holder, or delivered within such period as the court may direct. It is obviously important in an insolvency for the office holder to act as quickly and as decisively as possible. This is designed to ensure that the court can facilitate that by making sure that those papers etc to which the company appears to be entitled can get to the office holder as quickly as possible.

There are additional provisions within section 234 which deal with what proves to be wrongful seizure or disposal of property. In some circumstances the office holder may come into possession of papers or property which he or she thinks belongs to the company but which in the event does not. Section 234 gives protection to the office holder in those circumstances. If at the time of seizure or disposal of property not the property of the company the office holder both believed that he or she was entitled (whether through court order or otherwise) to seize or dispose of that property and as well had reasonable grounds for that belief then certain protection is given. That protection is relief from liability to any person for loss or damage resulting from the seizure or disposal unless that loss or damage is caused by the office holders own negligence. Indeed it goes beyond that because the office holder in addition in such circumstances has a lien on the property or the proceeds of sale for expenses in connection with the seizure or disposal. (A lien is effectively a security by which unless the lien is discharged you cannot obtain the property).

Thus there is extensive protection for officeholders, and they are given means of getting the relevant documents etc which will help them assess what claims the company has against whom.