Court Supervised Official & Provisional Liquidations
Inevitably, there are going to be circumstances where a company or a fund encounters more complex issues, and a Court supervised liquidation may be appropriate, or may be required by law.
This page sets out the circumstances where a provisional liquidator might be appointed.
The more common process is for a creditor to seek the appointment of a liquidator in the BVI. There are a number of routes that can be taken to place a company into liquidation, the most common being the presentation of a winding up petition by an aggrieved party with standing, such as an unpaid creditor. The company, its shareholders, the FSC in certain limited circumstances, or a voluntarily appointed liquidator may also petition the Court to place an entity into liquidation.
A company may also be placed into liquidation by a qualifying resolution of the members. While the liquidation process remains near identical to a court appointment, the liquidators must hold a meeting of creditors within 21 days. An advantage of this route may be the mitigation of the costs and delay of the application to the Court.
The primary responsibility of a liquidator is to realise the entity’s assets and to distribute the proceeds to creditors in accordance with their respective priorities. In addition, the liquidator must conduct an investigation into the actions of officers of the company, related parties and/or third party service providers to see if there are claims that can be brought that can swell recoveries for the benefit of creditors.
The liquidation brings to an end the authority of the incumbent directors and places the liquidator in control of the company and its assets, including the books and records.
The length of a liquidation varies significantly depending on the complexities of the engagement, such as the existence of fraud or litigation, but typically lasts for at least 12 months and sometimes much longer.
Costs of Liquidation
Typically the fees of a court appointed liquidator are charged at hourly rates; on a fixed cost basis; as a percentage of realisations; or some mixture of these. BVI liquidators are subject to rigorous regulation and inspection by the BVI Financial Services Commission and are closely monitored by the Court. A committee of creditors and the Court has oversight and approval powers over the liquidators’ fees.