What is a Provisional Liquidation?

A provisional liquidation usually occurs when there is a dispute between the shareholders and directors. One party will file for a provisional liquidation in the interest of preserving the company’s assets. A company may also be placed into provisional liquidation if it is insolvent. A Provisional Liquidator may be appointed by the Court to provide protection to the company’s assets and affairs until a winding up appeal can be heard.

Criteria for Appointing a Provisional Liquidator

The Court may consider the following points when deciding whether to appoint a provisional liquidator:

1. Are the assets of the company at risk?
2. Is there a need to take urgent action or can the matter wait for the hearing?
3. What is the likelihood that a winding up order will be made?
4. Is there a need for the accounts to be reviewed by an independent examiner?
5. Have the company’s affairs been properly conducted and in line with its legal requirements?
6. What is the need to preserve the status quo?

Protection for a Company’s Assets

To ensure protection of a company’s assets and affairs a Provisional Liquidator appointment can be made as soon as one business day from an application being filed. The independent Liquidator will ensure the status quo is preserved until the hearing of the winding up application.

Appointment of a Liquidator

The Court can decide to appoint a provisional liquidator to preserve assets until the Court can hear the petition for winding up. Courts are reluctant to interfere with company affairs, but if the company’s assets are at risk and the status quo needs to be preserved for the interest of the public, the Court will make an appointment. A Provisional Liquidator is a drastic step and the Court may consider if there are other measures it can take that are less severe.

The Liquidator is referred to as provisional because it may be reversed if the petition for winding up is unsuccessful at the hearing. If the petition is successful, an Official Liquidator is appointed in the place of the Provisional Liquidator.

Protect your liquidation assets

If you are looking for an expert to provide advice or guidance with provisional liquidation of your company's assets, there are multiple consulting agencies that are willing to help you and are just a call away.