Wrongdoing in insolvency: part 8
Section 218 of the Insolvency Act 1986 makes various provisions regarding investigations in respect of the officers and members of a company in liquidation.
These obligations fall into two different categories. The first is winding up by the court, the second is voluntary winding up. In respect of winding up by the court, if during the winding up the court considers that any past or present officer or any member of the company being wound up has been guilty of any offence in relation to the company being wound up for which he or she (namely the past or present officer or any member) is criminally liable then the court may direct the liquidator of the company to refer the matter to the Secretary of State (or in Scotland the Lord Advocate). That can be done by the court of its own motion, or it can be done in response to an application on behalf of a person interested in the winding up.
That is a power given to the court. In addition however it is provided that if it seems to the liquidator (not being the official receiver) that any past or present officer or any member of the company being liquidated has been guilty of an offence in relation to the said company for which he or she is criminally liable, the liquidator shall report the matter to the official receiver. If the official receiver obtains information than they are entitled to pass that information to the prosecuting authority or (by analogy with these and other provisions) probably the Inland Revenue.
There are similar provisions which apply to the liquidator in the course of a voluntary winding up, which extend to giving the Secretary of State (or if in Scotland Lord Advocate) such information and access to facilities by way of inspecting and taking copies of documents controlled by the liquidator relating to the matters in question as the secretary of state (or in Scotland the Lord Advocate) requires. The court is similarly given a power to direct the liquidator to make a report if it appears that any past or present officer of the company or any member has been guilty of such an offence and the liquidator has not made a report. Again this can be on the court's own motion or on the application of any person interested in the winding up.
If the Secretary of State pursues and investigation it is not restricted to criminal activity and will be conducted in private. Generally answers given may be used in subsequent civil proceedings but not in criminal proceedings save in the limited circumstances set out in section 219 (2A). That provides (other than in the case of Perjury Act 1911 sections 2 or 5 namely false statements made on oath otherwise than in judicial proceedings or made otherwise than on oath, or the equivalent provisions of Scotland) that no evidence may be adduced or question asked relating to the answer by or on behalf of the prosecution unless evidence relating to it is adduced or a question relating to it is asked in the proceedings by or on behalf of the person charged.
If the Secretary of State investigates, then the like obligation is to produce documents under Companies Act provisions apply. Similarly liquidators and every officer and agent of the company past and present are obliged to give all assistance in connection with a prosecution which such person is reasonably able to give (if criminal proceedings are instituted by the DPP or the Secretary of State following any report or reference under section 218). Agents for this purpose includes banker or solicitor or auditor. There are provisions to enforce this duty.
Thus the court and liquidators etc are given a wide range of powers and duties to enforce necessary investigations to pursue criminal conduct.