What is a provisional Liquidator

7 August 2017

In Scotland, a provisional liquidator, who needs to be a licensed insolvency practitioner can be appointed by either the creditors, directors or the company (ie the shareholders).

The provisional liquidators principle duty is to safeguard the company's assets. A Provisional Liquidator may be appointed after the petition is presented to court. So it is possible for a Provisional Liquidator to be in place before the company directors are aware of his appointment. The purpose of the appointment of a Provisional Liquidator is to protect and preserve the company's assets if perishable or likely to be removed.

If he/she has been appointed by a creditor e.g. as part of a debt collection exercise, the provisional liquidator will establish whether the company is solvent and if there are sufficient funds to make payment of the petitioning creditors debt, together with costs. If settlement of the petitioning creditors claim is made, the appointment of provisional liquidator can be withdrawn.

The appointment of a provisional liquidator can also be the first step to a full liquidation and is used where a company may continue to trade under the provisional liquidators supervision in order to potentially be sold.

A provisional liquidator can be appointed almost immediately if it is a petition presented by the directors and such appointment can continue for many months if deemed necessary.

Once a creditors meeting has been held the Provisional Liquidator will make way for the Full Liquidator to take over. Although in practice it is not uncommon for the them to be one and the same person.

Categories: Liquidation

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