570.Paragraph 9 repeals section 151 of the Insolvency Act 1986, a provision which provides the court with a power to order any contributory (that is a person liable to contribute to the assets of a company in the event of its being wound up), purchaser or other person from whom money is due to a company that is the subject of a winding-up order to pay the amount due into the Bank of England to the account of the liquidator instead of to the liquidator. The role of a liquidator of a company which is being wound up by the court is to secure, realise and distribute assets and distribute any surplus.
571.The origins of the provision date back to the Companies Act 1862 and it appears that its purpose was to have been a method for protecting creditors’ interests from an unregulated insolvency profession. Since 1986, there has been a strong regulatory framework in place to monitor and control the activities of liquidators and so this provision no longer serves any useful purpose. The last recorded use of the power was in 1991.
572.Section 151 applies to companies that are being wound up by the court in England and Wales and in Scotland. The repeal of the section forms part of the law of England and Wales and Scotland. Paragraph 9 will come into force on a day to be appointed by the Secretary of State in a commencement order.
573.The amendment made by paragraph 10 will form part of the law of England and Wales and Scotland. The amendment will not apply in Scotland, however. This is because the amendment concerns a liquidator’s release upon the rescission of a winding-up order and in Scotland the courts do not rescind winding-up orders. The amendment will come into force on a day to be appointed by the Secretary of State in a commencement order. It is deregulatory because it will mean that, where a court in England and Wales rescinds a winding-up order, the liquidator’s release should be addressed at the same time, as opposed to being the subject of a subsequent, separate court application. A winding-up order may be rescinded where, for instance, it is shown that the company’s circumstances are markedly more favourable than they were when the winding-up order was made or where the court did not have the full facts when it made the order.
574.Liquidators are liable for their acts in the winding-up unless and until released from that liability. It is important to liquidators to obtain their release as this provides significant protection against being sued for their acts and omissions in the winding-up. There is nonetheless currently no specific statutory provision concerning the release of a liquidator when a court order is rescinded. The release of liquidators in all other circumstances is already addressed – see section 174 of the Insolvency Act 1986. Paragraph 10 remedies this omission. It inserts a new subsection into section 174 which provides that the liquidator when a winding-up order is rescinded has his or her release with effect from the time the court may determine.