Insolvency – Selecting a Liquidator – 3 key factors to be considered has been saved
Insolvency – Selecting a Liquidator – 3 key factors to be considered
In order to avoid making what is a difficult process for Company Directors any more problematic, Directors should satisfy themselves that their chosen Liquidator is a specialist, with significant liquidation experience and a track record of successfully completed liquidations behind them. At the time of writing (Sept 2020) one in four Liquidations reviewed by the Chartered Accountants Regulatory Board (CARB) have been described as ‘Not Satisfactory’. Below are three key factors for Directors to consider when nominating a liquidator.
Factor 1: Cost
As liquidation work is highly regulated, most Liquidators adhere to the same ‘High Court Approved’ hourly rates, so by selecting a more experienced liquidator you are unlikely to increase the cost of liquidation. Ultimately, the costs of liquidation are discharged from the realised assets of the Company and are subject to the approval of the Creditors and the Liquidator will need to demonstrate to the creditors that the fee represents fair value for the work completed.
Factor 2: Experience
Having to liquidate your Company is obviously a very difficult prospect for a Director, but it can be made unnecessarily problematic if you engage a liquidator who is lacking in significant experience. Liquidation is a highly regulated activity and engaging an inexperienced liquidator brings an unnecessary risk that your liquidator will not complete the work with the necessary professionalism.
Factor 3: Reputation
From a non-financial perspective, and of particular importance to a Company Director, the advent of an insolvent liquidation necessitates the liquidator to file a report with the Office of the Director of Corporate Enforcement (ODCE), which report opines on the ‘Honest and Responsible behaviour’ of the Directors during their tenure as Directors of the Company. A negative report to the ODCE will automatically lead to legal proceedings in the High Court seeking the restriction of the Directors for a period of five years, which proceedings the Directors can choose to defend, with the associated legal costs or alternatively they can accept a voluntary restriction. In either case, having lost financially from a liquidation, no Company Director wants to have insult added to injury by having to face unnecessary restriction proceedings, which is another important reason why Directors should ensure the liquidator they nominate has plenty of experience of reporting to the ODCE.
Visit the Chartered Accountants Regulatory Board Report 2019, Page 11 of the Report for Summary of Inspections carried out in 2019.
Covid-19 impact has not fully materialised and insolvencies expected to increase in late 2020 and into 2021