Court Liquidation: Key Steps and Benefits

What is a court liquidation?

A court liquidation arises when the High court puts an insolvent company into liquidation after hearing a winding up petition.

The petition is most commonly taken by a creditor on the grounds that a company is unable to pay its debts. Alternatively, the petition can be made by the director of the company, with a view to protecting the assets of the company in the immediate term where the notice period for a Creditors' Voluntary Liquidation is not feasible. 

The court can grant the liquidator a broad range of powers, including to continue trading the company to enable the liquidator to sell the business as a going concern.

How a liquidator is appointed in a court liquidation

A court liquidation is commenced by order of the court, on foot of a petition brought to them to have the company wound up. The following parties are entitled to bring such a petition:

• The creditors
• The contributories (members with amounts due on shares)
• The members
• The ODCE
• The Registrar

Certain circumstances where the court may order the winding up of a company include:

• If the company has by special resolution resolved that the company be wound up by the court.
• If the company is unable to pay its debts as they fall due.
• If the court is of the opinion that it is just and equitable that the company be wound up.
• If the court is satisfied on foot of a petition brought by the ODCE that it is in public interest to wind the company up.

The court may appoint a provisional liquidator between the presentation of a petition and the hearing of that petition. This is generally done to protect the assets of the company. If a provisional liquidator is appointed, no action or proceedings shall be commenced or continued against the company expect by leave of the court.

Should the court order the winding up:

• The court shall appoint a liquidator; 
• The powers of the company’s directors will cease; and
• A statement of affairs must be filed by the director within 21 days.

The court liquidation process

The Liquidator’s primary purpose is to investigate the causes of failure of the company and to realise the value of the company’s assets to the best of their ability and distribute the proceeds of these realisations to the company’s creditors in order of their ranking

1. Secured creditors (banks, financiers, asset-based lenders);
2. Preferential creditors (Revenue, employees); and 
3. Unsecured creditors (trade suppliers)

A summary of the process that the Liquidator must undertake in a CVL is:

• Take possession of the company's property including all books and records.
• Finalise the list of creditors, the value of their claims and resolve any Retention of Title issues.
• Ensure that employee claims are dealt with in a timely manner.
• Realise the assets of the company.
• Investigate the reasons for the liquidation and submit findings to the ODCE making a recommendation as to the restriction or disqualification of company director(s).
• Report any suspected offence by the company or past or present officers or any member to the Corporate Enforcement Authority and Department of Public Prosecution, as applicable.
• Distribute the proceeds of any realisations to creditors based on their rankings.
• Filing of statutory documentation with the CRO, ultimately leading to dissolution and removal from the companies register.

How Grant Thornton can help

We have a proven track record in winding up companies through court liquidations on both the petition of companies themselves and on the petition of creditors having acted for numerous stakeholders including, shareholders, directors, Revenue Commissioners and unsecured trade creditors.

Our court liquidation experts at Grant Thornton will guide you through the whole process. We will;

• Provide advice to the directors/shareholders/creditors of the official liquidation procedure;
• Help you put a company into liquidation;
• Act as your liquidator for the company;
• Conduct a of full insolvency procedure associated with the court liquidation process;
• Provide you with the best knowledge, skills and service needed for a court liquidation;
• Provide a low cost and high quality service.

If you are a director of a company looking to understand the process for liquidating a company that is insolvent, find out more about our court liquidation services below.

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