The principal duty of a liquidator, under s 253 of the Companies Act 1993, is to take possession of, realise, and distribute the company’s assets, or their proceeds, for the benefit of the company’s creditors. To do that job effectively, the law must equip the liquidator with robust investigative powers. Sections 261-266 of the Act form the backbone of that authority, giving liquidators extensive rights to demand information, documents and cooperation from those connected to the company.
The Scope of the Power
Under s 261, a liquidator can, by written notice, require directors, shareholders, employees, receivers, auditors, solicitors and other persons with knowledge of the company’s affairs to deliver up records, provide information, or even attend an examination on oath. The reach of this provision is deliberately broad, extending beyond those who held formal roles, to anyone who may hold relevant knowledge or documents.
A person being examined under s 261(3) is entitled to legal representation, and while they cannot refuse to answer on the grounds of self-incrimination, their answers are generally protected from use in later criminal proceedings (except for perjury).
When cooperation is not forthcoming, s 266 provides judicial support. A liquidator may apply to the court for an order requiring a person who has failed to comply with a requirement under s 261 to do so.
Why It Matters
For accountants and lawyers involved with distressed companies, understanding the scope of a liquidator’s rights is crucial. Advisers holding client records must recognise that, once liquidation begins, those records belong to the company, and must be surrendered when requested.
