Requests from Office Holders for Information
When a company enters into Liquidation, more than likely the accountant is left with boxes full of information and outstanding fees, with no indication as to how they are to proceed. The accountant will hardly ever get any assistance, on how to deal with company assets.
The powers available to a Liquidator are vast and sometimes the accountant is left wondering whether or not he is duty bound to comply with the Liquidator, even if it be at a cost for complying with their requests. We have recently received quite a few phone calls from accountants asking for further advice on what they can and cannot do and some insolvency practitioners are putting lots of pressure on the former accountants.
The Liquidator should begin with a simple request to the former accountants to deliver up any books and records that they are holding on behalf of the company. There should be no need for any court involvement at this stage.
If the accountant does not deliver up their files to the Liquidator, then the full force of the Insolvency Act, Insolvency Rules and Companies Act “kicks in” and the accountant can be faced with a fine, being examined under oath in court, seizure of all of the company’s books and records, which would include the accountants working files and then ultimately, the arrest of the accountant!
This is very scary reading and therefore, we can always give advice to accountants who are faced with being chased by an Insolvency Practitioner, but my advice would be to always try and discuss any problems with the Liquidator to save any problems in the future. As an Insolvency Practitioner, when an accountant refuses to “hand over” their files, I think “What are they hiding?”
This may not always be that the accountant is hiding anything or indeed that there is anything untoward, but the accountant may wonder “How am I going to get paid, as the client has gone broke and I have done the work, but have an outstanding invoice?”
In complying with these requests, I would advise any accountants, or other professionals to enquire to the Insolvency Practitioner, as to how their costs incurred as a direct result of complying with such requests are to be paid. Plain and simple, if you don’t ask, you don’t get!
If however, the liquidator requires the information and there is no spare money, then they may request that the accountants deliver up the books and records to court. This can be where relationships can fall down and before they know it, the accountant can be asked to appear in court and if they fail to do so, the accountant can be arrested for contempt of court!
A Liquidator can make application to court under Section 234 of the Insolvency Act 1986 for any persons who have in their possession any property, books, papers or records that the company appears to be entitled. The court may order any such persons to deliver up or transfer any such property to the Liquidator. The court rarely makes any order for costs for the deliverance up of these records, as they form part of the company’s books and records.
There is a duty to co – operate with the office holder (Liquidator) under Section 235 of the Insolvency Act 1986 and persons falling within this category must:
(a) Give to the office-holder such information concerning the company and its promotion, formation, business, dealings, affairs or property as the office-holder may at any time after the effective date reasonably require, and
(b) Attend on the office-holder at such times as the latter may reasonably require.
An accountant could fall into this category by way of being under the employment of the company, by way of a service contract. The accountant may be faced with an outstanding bill, but unfortunately, they would have to co – operate, otherwise they may be liable to a fine.
A Liquidator has immense powers under Section 236 of the Insolvency Act 1986 and if the Liquidator thinks that the accountant is capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company, to the Liquidator and the accountant fails to attend the court, without reasonable excuse, the ramifications are severe and could cause a warrant to be issued for:
(a) The arrest of the accountant, or
(b) The seizure of books, papers, records, money or goods in the accountants possession
A lot of accountants feel that they are protected as they can claim a “lien” of the books that they hold, but under section 246 of the Insolvency Act 1986, it states that a lien or other right to retain possession of any of the books, papers or other records of the company is unenforceable to the extent that its enforcement would deny possession of any books, papers or other records to the office holder i.e. the Liquidator.
If a company is compulsory wound up (through the courts) then the insolvency practitioner acting as the liquidator acts as an officer of the court and has immense powers. They can order the private or public examination in court of the following:-
– the former directors, officers of the company
– any person known or suspected to have in their possession, any property of the company or supposed to be indebted to the company
– any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company and this can include the former ACCOUNTANTS
Should you require any further information or guidance on this subject, then please contact Debbie Cockerton on 01702 344558 or by email email@example.com