By Tony Johnson - 25 Oct 2018
Many people are surprised as to the extent of liquidators'
powers of investigation. Those powers can on occasion come in the
form of an application to the High Court under section 266 of the
Companies Act.
The recent Court decision of Walker v Angus reaffirmed
the extent of their inquisitorial powers. In particular, the
decision confirmed:
- Any person having knowledge of the affairs of the company can
be summoned. Although those words are in the statute, they
had previously been interpreted narrowly to mean those people
similar to the likes of shareholders, directors, accountants and
lawyers. The Court back tracked on this and indicated that
any person having knowledge of the affairs of the
company, whether a professional or not, is a potential candidate
for summons and examination.
- Such a person is required to produce any documents which relate
to the business or affairs of the company. This is much wider than
simply company financial records.
- Although the Court has an overall discretion as to the extent
of disclosure, two guiding principles are whether the liquidators'
application represents a genuine investigative step towards
reaching an informed decision and whether the order is necessary to
put the liquidators in the same position as the directors insofar
as knowledge of the company's affairs is concerned.
- Although the Court has the jurisdiction to award compensation
to a person required to comply with a section 266 order, such an
award would be the exception rather than the rule. The Court
alluded to the costs generally as being part of the ordinary cost
of business for those such as financiers and professionals
servicing such clients.
If you are served with a notice under section 261 or an
application under section 266 you should seek legal advice as to
how to respond. If you wish to discuss the matter please call Tony Johnson or
Pierce
Bedogni in our litigation team.