Realisation of Assets, etc.

Part 11 – Winding Up

The liquidator takes control of the seal, books and records of the company upon appointment, and all persons who may have any of these items must surrender them to the liquidator (Section 596). This latter element is new. The section also applies to voluntary windings-up, which is new. Provisional liquidators, however, are not included in this section; their powers are from now on going to be determined by the Court, as stated here (Section 624(3)).

The rule that a company related to the company in liquidation may have to pay some or all of the debts of the company in liquidation is re-enacted here (Section 599). This was previously found in Section 140 of the 1990 Act. The only difference in this part of the statute is the definition of “creditor” – the amount that must be owing to a creditor has been increased in line with the rest of the Act, and thus the creditor has standing to petition for the winding up of the company.

The rule which allows a liquidator to disclaim onerous obligations, previously set out in Section 290 of the 1963 Act, is re-enacted here (Section 615). The flipside of that rule – that parties who are entitled to the benefit or subject to the burden of a contract made with the company may apply to have the contract rescinded – is re-enacted here (Section 616).

Section 600 allows for the pooling of assets between two related companies in liquidation, and for their assets to be divided up between the creditors of each company. This also derives from Section 140 of the 1990 Act.

A liquidator – in a voluntary winding up only – is allowed to accept shares as consideration for the sale of company property (Section 601). This is a re-enactment of Section 260 of the CA 1990.

Section 602 is a mixture of two sections of the 1963 Act: Sections 255 and 218. Post-liquidation dispositions of property, transfer of shares, and alteration of a shareholder’s status, are prohibited by the section. If done, they are void. This applies to voluntary-windings up too.

New: Also now applicable to voluntary windings-up – as well as to court ordered windings up – is the rule that if any attachment or execution, etc, is in being against the property of a company which has commenced winding up, that attachment, execution, etc, will be void. (Section 603).

The rule that unsecured creditors are to be treated equally remains the same, and the provision which en-acted that rule, Section 291 of the 1963 Act, is re-enacted in Section 606 of the new Act. Unless the execution or attachment of company property began before the commencement of the winding up, the creditor is not entitled to retain the benefit of their attempted enforcement.

The duties of the sheriff in relation to goods taken in execution remain the same, and are set out here (Section 607). The only new element is the change in the monetary figure from the out-dated €25.39 to €1,000.

There are a number of sections in this part of the Act, which will have been so familiar to practitioners as to be known by their shorthand or by their number. These are all now found in this Winding Up part of the Act, and are set out below for convenience.

• The old fraudulent preference rule – set out in Section 286 of the 1963 Act – is re-enacted in Section 604 of the new Act. What is new, is that the phrase fraudulent preference has been done away with, in favour of “unfair preference”. The time periods are the same (6 months in general, 2 years if the transaction involves a connected person).

• The old fraudulent disposition rule – familiar to practitioners as Section 139 of the 1990 Act – is re-enacted in Section 608 of the new Act.

• The officers of the company may be made personally liable for some or all of the debts of the company where it is found that they did not keep adequate accounting records. This rule was set out in Section 204 of the 1990 Act and is now found in Section 609.

• Civil liability of company officers for reckless or fraudulent trading – familiar to practitioners as Section 297A – is now found in Section 610 and Section 611.

• The misfeasance rule – previously found in Section 298 of the 1963 Act – is re-enacted here (Section 612). The only difference is the section relates not just to directors, but to “certain persons”, i.e. liquidators, provisional liquidators, examiners, receivers, and promoters. The misfeasance rule is extended to directors of a holding company here (Section 613).

• The old rule which presumed that floating charges were invalid if they were created (1) to secure past debts, (2) within 12 months of the liquidation, and (3) not supported by fresh consideration, is re-enacted here (Section 597). This rule used to be found in Section 288 of the 1963 Act.

• The other circumstances in which a floating charge will be found to be invalid – previously found in Section 289 of the 1963 Act – are now set out here (Section 598). They remain unchanged.