Appointment of company liquidator

“The company liquidator must be a licensed insolvency practitioner’’?

The powers and duties of a liquidator of a company, if he/she is not the official receiver who by virtue of his office is qualified, it is required that the person appointed be suitably trained and qualified, since he will take under his control and custody all the property and actionable rights to which the company is entitled or appears to be entitled. Also, he shall exercise all powers and authorities, and perform all duties which the law confers and imposes on him. That is why the Companies Law, Chapter 113, Article 314 A, provides that, with the exception of the official receiver, the liquidator must be a person who has acquired the qualifications and license to practice the profession of Insolvency Practitioner, i.e. be a natural and not a legal person and have at least one of the qualifications of an advocate, lawyer, chartered accountant, registered auditor, actuary, officer or examiner of the Official Receiver and/or the Insolvency Service or be a professional in the financial sector. The liquidator should have the specified professional experience, pass professional competence examinations, which have been organized or recognized by the Republic and maintain valid professional liability insurance.

The insolvency practitioner according to the law is registered in the record of the Insolvency Service and is subject to rules of professional conduct, which cover at least his status as a protector of the public interest, his integrity and objectivity, as well as his professional competence and due diligence. He is authorized to act as an insolvency practitioner only if he has proven professional experience in insolvency matters for a period of two years or for six hundred hours within this period or experience in ten cases of which at least half are not related to voluntary liquidations.

The Supreme Court, in the context of its decision issued in C.A.278/2015, dated 12.04.2023, dealt with the issue following an appeal by the director of a company that was placed in liquidation, who appealed the decision of the District Court that appointed an insolvency practitioner instead of a lawyer in place of the liquidator of the company. In particular, the meeting of creditors decided by a majority in number and amount to appoint a specific insolvency practitioner, while the shareholders/contributors decided to appoint a lawyer. The official receiver in his capacity as the provisional liquidator of the company applied to the Court to approve the resolutions and the decision passed by the creditors and shareholders/contributors at the meetings and to issue an order accordingly both for the appointment of the insolvency practitioner as liquidator and to approve the letter of guarantee filed by him and to determine his remuneration to be received in accordance with the Liquidation Regulations.

After issuing a winding-up order, as reiterated by the Supreme Court, the process of settling the company's rights and obligations begins and the appointed liquidator is now solely responsible for the management of the company's assets and affairs. With reference to the matter of the Court's jurisdiction to issue the order, it referred to the provisions of Article 209 of Cap. 113, where it is expressly stated that in order to determine whether a procedure falls under the jurisdiction of a Superior or District Judge, the amount of the company's share capital is paid or credited as paid is taken into consideration. In the present case, the issued share capital of the company under liquidation was €17.100 and the application was correctly made and received by the District Judge.

Regarding the issue of whether the insolvency practitioner was correctly appointed as liquidator, the Supreme Court referred to the provisions of Article 314 A(1) of Cap.113, where it is expressly stated that the liquidator must be a person who has obtained the qualifications and license to practice of the profession of Insolvency Practitioner, which the appointed person held while the lawyer did not. Therefore, it emphasized that the lawyer proposed by the shareholders/contributors did not meet the qualifications for appointment, as the Court of first Instance correctly decided and given that no valid reason was put forward for not appointing the Insolvency Practitioner, as decided by the majority of creditors, justifiably issued the order.

The Supreme Court noted that the appellant did not present to the meeting of creditors evidence from which it emerged that he was a creditor of the company. Consequently, the debt verification he submitted was not accepted and he was not allowed to vote in relation to the physical person who would be appointed as liquidator of the company. Nor was he a shareholder/contributor of the company and considered it doubtful whether he was authorized to appear in the first instance proceedings and file an objection to the specific application.