Appointment of a company liquidator

A liquidator must be a licensed insolvency practitioner

The liquidator of a company, if they are not the official receiver who by virtue of their office is qualified, must be suitably trained and qualified, since they will control all the property and actionable rights to which the company is entitled or appears to be entitled to. They shall exercise all powers and authorities, and perform all duties which the law confers on them.

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 licence to practice the profession of Insolvency Practitioner, that is be a physical, not legal person and have at least one of the qualifications of advocate, lawyer, chartered accountant, registered auditor, actuary, officer or examiner of the official receiver and/or insolvency service or be a professional in the financial sector. They must pass professional competence examinations, which have been organised or recognised by the state and maintain valid professional liability insurance.

An insolvency practitioner according to the law is registered with the insolvency service and is subject to rules of professional conduct, which cover at least their status as a protector of the public interest, their integrity and objectivity, as well as professional competence and due diligence. They are authorised to act as an insolvency practitioner only if they have proven professional experience in insolvency matters for two years or 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, issued a decision in C.A.278/2015, dated April 12, which dealt with the issue, following an appeal by the director of a company in liquidation, who appealed a district court decision that appointed an insolvency practitioner instead of a lawyer in the place of the liquidator of the company. The creditors decided by a majority 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 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 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 began and the appointed liquidator is now solely responsible for 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 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 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 stated the liquidator must have the qualifications and licence to practice of the profession of insolvency practitioner, which the appointed person held while the lawyer did not. Therefore, the court of first instance made the correct decision and, given no valid reason was put forward for not appointing the insolvency practitioner, 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. Nor was he a shareholder/contributor of the company and it was considered doubtful whether he was authorised to appear in the first instance proceedings and file an objection to the specific application.

George Coucounis is a lawyer practicing in Larnaca and the founder of GEORGE COUCOUNIS LLC, Advocates & Legal Consultants, www.coucounis.law, [email protected]