Part G Legal implications of companies in difficulty or in crisis 21: Insolvency and administration 331It is important to remember that creditors with fixed and floating charges may appoint a receiver to sell
the charged asset – any surplus is passed onto to the liquidator. In the event of a shortfall they become
unsecured creditors for the balance.3.6 Completion of compulsory liquidation
When the liquidator completes their task they report to the Government, which examines their accounts.
They may apply to the court for an order for dissolution of the company.
An official receiver may also apply to the Registrar for an early dissolution of the company if its realisable
assets will not cover their expenses and further investigation is not required.4 Differences between compulsory and voluntary
liquidation
The differences between compulsory and voluntary liquidation are associated with timing, the role of the
official receiver, stay of legal proceedings and the dismissal of employees.The main differences in legal consequences between a compulsory and a voluntary liquidation up are as
follows.Differences
Control Under a members' voluntary liquidation the members control the liquidation
process. Under a creditors' voluntary liquidation the creditors control the
process. The court controls the process under a compulsory liquidation.
Timing A voluntary winding up commences on the day when the resolution to wind up
is passed. It is not retrospective. A compulsory winding up, once agreed to by
the court, commences on the day the petition was presented.
Liquidator The official receiver plays no role in a voluntary winding up. The members or
creditors select and appoint the liquidator and they are not an officer of the
court.
Legal proceedings In a voluntary winding up there is no automatic stay of legal proceedings
against the company, nor are previous dispositions or seizure of its assets void.
However the liquidator has a general right to apply to the court to make any order
which the court can make in a compulsory liquidation. They would do so, for
instance, to prevent any creditor obtaining an unfair advantage over the other
creditors.
Management and staff In any liquidation the liquidator replaces the directors in the management of
the company (unless they decide to retain them). However, the employees are
not automatically dismissed by commencement of voluntary liquidation.
Insolvent liquidation may amount to repudiation of their employment contracts
(provisions of the statutory employment protection code apply).5 Saving a company: administration
Administration is a method of 'saving' a company from liquidation, under the Enterprise Act 2002.5.1 What is administration?
An administrator is appointed primarily to try to rescue the company as a going concern. A company may
go into administration to carry out an established plan to save the company.FAST FORWARD
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