Why Appoint a Provisional Liquidator
This typically happens where a winding-up petition has been filed and the petitioner, concerned that the assets of the company are in jeopardy, applies to the Court for the appointment of a provisional liquidator. If the Court is satisfied that the assets are in danger then it can appoint a provisional liquidator whose role, traditionally, is to safeguard and protect the assets of the company until the hearing of the petition. The period between the presentation of the petition and the winding up hearing can be as much as six to eight weeks and for that reason it is not unusual for a creditor to make such an application. A provisional liquidator can also be appointed if the Court considers it is in the public interest, but only the Financial Services Commission can make an application on this ground.
Powers of Provisional Liquidators
The powers of the provisional liquidators are those set down in the order pursuant to which the appointment is made. In most cases, the solicitors acting for the petitioner will present to the Court a fairly extensive list of powers but it cannot be assumed that the Court will automatically agree with all of the powers sought.
The Court, together with counsel for both sides, if appropriate, will seek to establish what powers are necessary in the circumstances, but at the same time giving the provisional liquidator the authority to go back to the Court for an extension of those powers if he so wishes, or if it becomes necessary in the circumstances.
Exit from Provisional Liquidation
In most cases where a provisional liquidator has been appointed, it is likely that the company will eventually be wound-up, in which case the appointment of the provisional liquidator terminates on the determination by the Court of the application to appoint a liquidator. Once the winding-up order has been made, the provisional liquidators may continue in office but now they are known as the liquidators. They will convene a meeting of creditors within 21 days of the date of the appointment unless it is not feasible or appropriate to convene the meeting at that time. At that meeting, they will be required to report to the creditors on the progress to date and give them the opportunity to vote on the appointment of a liquidator and the formation of a creditors’ committee.
It is possible that one exit route from Provisional Liquidation could be a Scheme of Arrangement in which circumstance the provisional liquidator is likely to be discharged from office as part of the process once the Scheme has been approved. This would however be subject to the approval of the Court.
Remuneration of Provisional Liquidators and their Agents
As part of the order under which they are appointed, there will be a provision that the remuneration of the provisional liquidators needs to be approved by the Court under the usual assessment process for insolvency practitioner’s fees.