Answer ... Provisional liquidation: A provisional liquidation will commence on the making of the appointment order; however, if a winding-up order is subsequently made, the winding-up will be deemed to have commenced at the time of presentation of the winding-up petition.
The effects of a provisional liquidation will depend on the terms of the appointment order, as provisional liquidators have only the powers granted to them in the appointment order. The scope of those powers will depend on the reason for their appointment. If a restructuring is proposed, then in some cases existing management will be allowed to remain in control of the company (subject to the supervision of the provisional liquidators and the Grand Court), in what are known as ‘light touch’ provisional liquidations. In other restructuring cases, the directors’ powers may be displaced entirely by the powers given to the provisional liquidators for the duration of the provisional liquidation.
Provisional liquidators are appointed and supervised by the Grand Court. The consent of stakeholders is not required, but their views on whether an appointment should be made and who should be appointed will or may (depending on the circumstances) be given weight by the Grand Court in the exercise of its discretion.
Official liquidation: Pursuant to Section 100 of the Companies Law, the winding-up of a company is deemed to commence at the time of the presentation of the winding-up petition, unless:
- a resolution has been passed by the company for voluntary winding up;
- the period, if any, fixed for the duration of the company by the articles of association has expired; or
- the event upon the occurrence of which it is provided by the articles of association that the company is to be wound up has occurred.
In the above cases, the winding up is deemed to have commenced at the time of passing of the resolution, the expiry of the relevant period or the occurrence of the relevant event.
The deemed commencement of a company’s winding up is relevant for calculating the relevant time periods for claims under brought pursuant to Section 99 and Section 145 of the Companies Law.
Voluntary liquidation: Pursuant to Section 117 of the Companies Law, a voluntary winding up is deemed to commence:
- at the time of passing of the resolution for winding up; or
- on the expiry of the period or the occurrence of the event specified in the company’s memorandum or articles of association.
(This notwithstanding, a supervision order may subsequently be made by the court.)
The directors are displaced by the voluntary liquidator on the commencement of a voluntary liquidation, except to the extent (if any) that the company (through a general meeting) or the voluntary liquidator sanctions the continuance of the directors’ powers. The directors may, however, be appointed as the voluntary liquidators, as there are no qualification requirements for the role.
A voluntary liquidator must apply to the Grand Court for an order that the liquidation continue under the court’s supervision unless, within 28 days of the voluntary liquidation commencing, the directors sign a declaration that the company will be able to pay its debts in full (with interest) within a period not exceeding 12 months after commencement of the voluntary liquidation. Even if such a declaration is made, the liquidator or any creditor or shareholder can apply to bring the liquidation under the Grand Court’s supervision in certain circumstances. If a voluntary liquidation is brought under the supervision of the Grand Court, it continues as an official liquidation which is deemed to have commenced on the commencement of the voluntary liquidation.