Litigation by insolvent companies:

Litigation by insolvent companies: issues to consider before starting a claim Resource type: Practice note Status: 25 July 2012 Jurisdictions: England, Wales This document is published by Practical Law Company. This document can be found at: www.practicallaw.com/9-520-4950. Request a free trial and demonstration at: www.practicallaw.com/about/plc A practice note on the issues to be considered when litigation is pursued on behalf of an insolvent company. It deals with the types of claim that may be available in corporate insolvency (whether administration, liquidation or receivership), the need for sanction, the claimant s potential liability for costs, funding options and settlement of claims. Adam Deacock, 11 Stone Buildings Contents Claims by and on behalf of insolvent companies What claims are available in corporate insolvency? Characteristics of insolvency claims Who has a stake in the outcome of litigation? The need for sanction What actions does an office-holder need sanction to commence? Who can sanction litigation? What if a liquidator commences litigation without the appropriate sanction? The insolvent claimant or office-holder's potential liability for costs General principles Receivership Security for costs Strategic considerations for defendants Security for costs Settlement and ADR Counterclaim Can a potential defendant take an assignment of the claim against it? Which types of claim are available in each insolvency procedure? How can an insolvent company fund litigation? Key issues Funding options for insolvency litigation CFAs in insolvency Funding from creditors and third parties Adverse costs insurance Assignment Choice of funding option 1

Litigation by insolvent companies: issues to consider before starting a claim Claims by and on behalf of insolvent companies What claims are available in corporate insolvency? Insolvency processes (such as administration, liquidation and administrative receivership) generally involve getting in the property of the company and realising assets. The assets of an insolvent company usually include debts and other claims which have to be recovered by legal action. When a company enters a formal insolvency process, it retains any claims it may have before insolvency, for example, claims for debt, breach of contract, tort, restitution, recovery of property. In addition, there are claims that may be brought by the office-holder (that is, the administrator or liquidator). There are three categories of these claims: Claims which only exist in an insolvency process and may only be pursued by the insolvency practitioner, not the company itself (office-holder claims). These include: fraudulent trading claims under section 213 of the Insolvency Act 1986 (IA 1986); wrongful trading claims under section 214; transaction at an undervalue claims under section 238; preference claims under section 239; claims for an extortionate credit transaction under section 244; and transaction defrauding creditors claims under section 423. Procedures which are available to the office-holder to bring claims personally which existed prior to the insolvency and could, alternatively, be pursued in the name of the company in the ordinary way. These include: misfeasance claims against the directors and shareholders of the company under section 212 of the IA 1986; applications under section 234 for the payment, delivery, conveyance, surrender or transfer of property, books, paper or records to which the company is entitled; and applications under section 237 for delivery of property or money appearing on consideration of evidence obtained under section 236 or 237 to belong to or be due to the company. Claims which may be available by virtue of the avoidance of transactions upon the company entering into an insolvency process but where no specific claim or procedure is prescribed. These include: claims to recover property under transactions which are void by virtue of section 127 of the IA 1986; claims for the avoidance of a floating charge under section 245 of the IA 1986; and claims for the avoidance of a charge for non-registration under section 874 of the Companies Act 2006. Some of these claims are available only in certain types of insolvency procedure. For more detail, see Which types of claim are available in each insolvency procedure? Characteristics of insolvency claims An office-holder is likely to take a fairly pragmatic view of the company s claims. His aim is to seek to realise assets as quickly and cost effectively as possible. The office-holder is unlikely to have strong personal feelings about commercial claims against unconnected parties. However, the same is not always true of internal company claims and office-holder claims (such as fraudulent trading claims or misfeasance proceedings) which the office-holder may feel obliged to pursue. The office-holder is unlikely to have personal knowledge of the factual background to a claim. This may place him at a severe disadvantage in the sort of case where witness evidence is critical (for example, a claim based on oral contracts). Moreover, the office-holder may not have the relevant documents which might have been lost destroyed or retained by the directors. However, the office-holder has powers under sections 235 and 236 of the IA 1986 to compel former officers and third parties to produce documents, even where they may be incriminating and where the request might in other contexts be regarded as fishing. 2

Litigation is not always the top priority in an insolvency procedure. For example, in an administration, the administrators are often mainly concerned in the initial stage with seeking to rescue or sell the business. Claims are, therefore, often brought some time after the onset of insolvency. Who has a stake in the outcome of litigation? Generally, it will be the unsecured creditors who stand to gain from the realisation of assets. However, if the assets of the company are charged, it may be the secured creditors who stand to gain. This is particularly likely to be the case with an administration, and will inevitably be the case in administrative receivership. Office-holder claims are not regarded as property of the company. The sums recovered under them are therefore not capable of being charged (Re Yagerphone [1935] Ch 392 and Re Oasis Merchandising [1998] Ch 170). In contrast, it has been held that property which was disposed of in breach of section 127 of the IA 1986 remains subject to a charge because the disposition was void (Merton and another v Hammond Suddards and another [1996] 2 BCLC 470). In many cases, it will be the office-holders themselves who stands to gain from litigation because there are no other assets to pay their fees. (For more detail, see Practice note, How are assets distributed to creditors in corporate insolvency procedures?) The need for sanction What actions does an office-holder need sanction to commence? Liquidators Liquidators require sanction to bring or defend proceedings in the name of the company in a compulsory liquidation (section 167(1), IA 1986). However, no such sanction is required in a voluntary liquidation (section 165(3) and paragraph 4, Schedule 4, IA 1986). A liquidator in either case requires sanction to bring proceedings under the following sections of the IA 1986: 213, 214, 238, 239, 242, 243 and 423 (paragraph 3A, Schedule 4, IA 1986). It appears that a liquidator does not require sanction to commence proceedings under sections 212, 234 or 237 of the IA 1986. Sanction must be obtained for a particular set of proceedings and cannot be obtained generally (rule 4.184, Insolvency Rules 1986 (SI 1986/1925) (IR 1986). Consideration should also be given for obtaining the approval of floating charge holders under rules 4.218A-E (see General principles). Administrators and administrative receivers There is no general provision requiring sanction in administration or administrative receivership comparable with sections 165 and 167 of the IA 1986 or rule 4.218A-E of the IR 1986. Accordingly schedule 1 of the IA 1986 (unlike Schedule 4) makes no mention of sanction. Nevertheless, administrators are generally supposed to manage the affairs, business and property in accordance with the proposals approved by creditors (paragraph 68, Schedule B1, IA 1986). Where litigation is contemplated, consideration should be given to having this approved as part of the proposals. However, this would not prevent the administrator from taking action where necessary prior to the meeting. Who can sanction litigation? In a voluntary liquidation, sanction may be granted by any one of the following: The court. The liquidation committee. A meeting of creditors (if there is no liquidation committee). (Section 165(2)(b), IA 1986.) In a compulsory liquidation, sanction may be granted by: The court. If the Official Receiver is the liquidator, by the Secretary of State (section 141(4), IA 1986). Otherwise, either: 3

Litigation by insolvent companies: issues to consider before starting a claim the liquidation committee (section 167(1)(a)); or the Official Receiver (if there is no liquidation committee) (rule 4.172, IR 1986). What if a liquidator commences litigation without the appropriate sanction? The authorities suggest that lack of sanction will not either: Render the litigation a nullity. Enable the defendant to object to its prosecution (paragraphs 859 860, Dublin City Distillery Ltd v Doherty [1914] AC 823). If a liquidator commences litigation without obtaining the appropriate sanction, he will not be entitled to his expenses out of the assets of the company unless he obtains ratification of his acts from either the court or the liquidation committee (In re London Metallurgical Co [1897] 2 Ch 262). On the face of rule 4.184(2) of the IR 1986, the court or the liquidation committee can ratify the acts of the liquidator to enable him to recover his expenses, but only if the liquidator both: Acted in a case of urgency. Sought ratification without delay. However, the court has held that: Notwithstanding the clear words in rule 4.184(2), the court had power to ratify the acts of the liquidator where there was no urgency, just inadvertence. It could refuse to grant sanction retrospectively but yet grant sanction prospectively. This would allow the liquidator s costs going forward but not his costs up to the date of the application for sanction. (Gresham International Ltd and another v Moonie and others [2009] EWHC 1093 (Ch).) Notwithstanding Gresham, it is unwise for a liquidator to issue proceedings without sanction unless it is necessary (for example, because of pressing limitation problem or immediate risk of dissipation of assets). To obtain sanction to bring or defend proceedings, the liquidator ought to satisfy himself that: The proceedings have a reasonable prospect of success. It is likely that an actual recovery will be made. The costs that will be incurred are likely to be proportionate to the recovery. The insolvent claimant or office-holder s potential liability for costs General principles Where the office-holder litigates in his own name unsuccessfully he will be personally liable for costs like any other litigant. He will ordinarily be entitled to recoup these costs from the assets of the company (if any). However, the court may deprive him of that right in appropriate cases (Re Capitol Films Ltd (in administration) v Cobalt Pictures Ltd [2010] EWHC 3223 (Ch), see Legal update, Irrational administrators denied ability to recover costs as administration expenses (High Court)). For more information about the recoverability of litigation costs, see Practice note, Costs: an overview. Where the insolvent company brings or defends proceedings unsuccessfully, it is likely that it will be ordered to pay the other side s costs. The office-holder will not ordinarily be personally liable for costs, but a third party costs order could be made if his conduct warrants it (for example, by being highly unreasonable). (For more detail about third party costs orders, see Practice note, Costs and non-parties to litigation.) In Wright Hassall v Morris [2012] EWCA 188 Ch, the court treated an order made in litigation against Mr Morris (administrator of Marketbalance Ltd and Phoenix Assurance Management Ltd) as imposing liability only the companies and not the administrator personally. See Legal update, Administrator held not personally liable for adverse costs order (High Court). It is recommended nevertheless that any office-holder being sued in his own name clarifies whether personal liability is alleged. If personal liability is not alleged, the office-holder may require the company to be substituted as defendant. In liquidation, an adverse costs order will be payable out of the assets of the company in priority to all other claims including the liquidator s remuneration and his own side s costs (Re MT Realisations Ltd [2003] EWHC 2895). This does not extend to the direct costs of realising the assets which are to pay the costs order (Re Movietex [1990] BCC 491). 4

Note that, in liquidation, costs of litigation may not be recovered from assets subject to a floating charge unless they have been approved by the charge-holder or the court under the procedure set out in rules 4.218A-E of the IR 1986. The same principles apply where the proceedings are commenced prior to liquidation but the claim or defence is adopted by the liquidator (Re Wenborn & Co [1905] 1 Ch 413). Costs awards against a company in administration are likely to be treated similarly to costs awards against one in liquidation. The defendant should consider making an application for security for costs at an early stage, unless there is reason to suppose that there will be enough assets to pay the costs (see Security for costs). (See also Practice note, Security for costs: an overview.) Receivership Receivership is something of a special case. There are no particular statutory rules dealing with expenses in a receivership. An ordinary costs order against a company in receivership will not give the recipient priority over the other creditors (including the secured creditor who appointed the receiver). The receiver is not normally personally liable for the costs of proceedings issued in the name of the company as he is generally its agent (see Practice note, Administrative receivership). Even though the litigation is likely to be for the benefit of the appointing secured creditor, the court will not ordinarily make a costs order against: The receiver (Dolphin Quays Developments Ltd v Mills and others [2008] 1 WLR 1829). The secured creditor - unless it either funds the litigation by further advances (not just out of receiver s realisations) or interferes in the conduct of the litigation. The opposing party should apply for security for costs at an early stage. Unless the company is also in liquidation, this is probably the party s only costs protection. If the company goes into liquidation after it goes into receivership, the opposing party is in a much stronger position because: The receiver s agency ends (Gosling v Gaskell [1897] AC 575). If the receiver pursues proceedings in the name of the company as principal (or perhaps as agent of the appointing secured creditor) he will be personally liable for costs which he will presumably be able to charge as an expense of the receivership (Bacal Contracting Ltd v Modern Engineering [1980] 2 All ER 655 and Anderson v Hyde [1996] 2 BCLC 144). Security for costs The court has power under Civil Procedure Rule (CPR) 25 to order that a claimant (or counterclaimant) provides security for the defendant s costs. In particular, security may be ordered against a company where there is reason to believe that it will be unable to pay its opponent s costs if ordered to do so (CPR 25.13(2)(c)). However, the court will not order security unless it is just in all the circumstances to do so. The court will be concerned to avoid stifling a genuine claim (Sir Lindsay Parkinson & Co v Triplan Ltd [1973] QB 609 CA, per Lord Denning MR). The office-holder should take into account the risk that the defendant may make an application for security for costs. On an application, critical questions are likely to be whether: There are any outside funds to meet the claim (for example, from shareholders or secured creditors). It will be for the claimant to persuade the court of this. The defendant s conduct is or is alleged to be responsible for the company s insolvency. Unconnected third party defendants are likely to have more sympathy from the court than directors defending claims for misappropriation of funds. To avoid the costs of opposing an application in court, the office-holder may be prepared to offer to provide some security for costs, for example, by making a payment into court. For more detail, see Practice note, Security for costs against an insolvent company. How can an insolvent company fund litigation? Key issues When an office-holder is considering issuing a claim or continuing litigation after his appointment, the first question is whether the company has sufficient assets to meet: 5

Litigation by insolvent companies: issues to consider before starting a claim The company s own costs. The other side s costs if the claim is unsuccessful. The second point may be more or less important depending on the exposure to costs. Note: If the office-holder litigates in his own name, he will be personally liable and will need a complete and effective indemnity from the company s assets or elsewhere. If the litigation is in the company s name, the office-holder will (unless he acts unreasonably so as to attract a third part costs order) only be risking: such assets as the company has; that he will be unable to pay his own remuneration and expenses. Funding options for insolvency litigation If there are inadequate assets to fund the claim, the office-holder may consider the following options: Conditional fee agreement (CFA). This is an agreement that the company s own legal costs (or part of them) will only be payable in the event that the case is successful. See CFAs in insolvency. Funding from creditors. This was the traditional way in which such claims were prior to the advent of CFAs. The creditors stand to benefit from a successful claim, so they may be prepared to either: lend the company or office-holder money to fund it; or cover the risk of adverse costs. See Funding from creditors and third parties. Insurance. The insolvent company may have had before the event or BTE insurance which will pay for the cost of pursuing the claim. BTE insurance is relatively common for householders but comparatively rare for companies. It is different from insurance to cover the loss in question itself (such as employee fidelity insurance). With BTE insurance, the insurance company will pay the loss itself but be subrogated to the claim which, in effect, it will pursue. The company may wish to consider after the event (ATE) insurance which may cover the company s own costs, the other side s costs of the claim or both. See Adverse costs insurance. Assignment of the claim. The office-holder may wish to assign the whole or part of the claim, either to realise it immediately or in order to provide funding for the action. See Assignment. CFAs in insolvency Solicitors and barristers may act on a CFA. The basic model is that the lawyers may receive: Nothing if the case is unsuccessful. Their ordinary fees plus an uplift if the case is successful. The uplift is designed to balance the risk to the lawyers that the case will not succeed. The use of a CFA means that litigation can be run without costs having to be financed up front. However, the total costs can end up being disproportionate and reducing the recoveries available to creditors. As a matter of simple maths, significant uplifts are required to balance the case of not succeeding, even in quite good cases. If the prospects of success are 75%, sensible lawyers will require an uplift of 33% to ensure that their expected recoveries will equal the normal fees. But a claim with 60% chances of success will require an uplift of 67%. Success is normally defined in most litigation as obtaining judgment. This leaves the client taking the risk that the other side will not pay the judgment debt. In insolvency cases, the officer-holder frequently does not wish to take this risk and wishes to have success defined as the actual recovery of assets. However this is likely to mean that the uplift will have to be higher. It may mean that perfectly arguable cases are rather risky for the lawyers to run and may be unacceptable bearing in mind that the maximum uplift chargeable is 100% (Conditional Fee Agreements Order 2000 (SI 2000/823)). There remains a problem with funding disbursements such as court fees, copying charges and expert witnesses fees because these disbursements are usually outside the scope of the CFA and have to be paid in cash in any event. There are reputational issues to consider when using a CFA in the context of insolvency. In Segal v Pasram & Pasram (unreported), 3 December 2007, the court was unwilling to order the respondent to pay the trustee in bankruptcy s costs which were subject to a 6

CFA with 85% uplift and greatly exceeded the debts in the estate. The court commented that it would be bad for the reputation of the profession if high uplifts were agreed in cases involving claims to interests in the matrimonial home. Nevertheless, the judge ordered that the trustee s costs be paid as an expense of the bankruptcy (and, therefore, in priority to the creditors). There remains some uncertainty about the willingness of the courts to order costs with high uplifts and this tends to encourage the settlement of claims for a global sum out of which costs are met. Practitioners should be aware that it is proposed by Jackson LJ s Review of Civil Litigation Costs that CFA uplifts and adverse costs insurance will no longer be recoverable from the other side. This is likely to be placed in force early in 2013. However, in relation to insolvency claims these provisions will be delayed until April 2015 (see Legal update, Insolvency proceedings exempt from litigation funding reforms until 2015). For further information about CFAs generally, see Practice note, Conditional fee agreements: an overview. Funding from creditors and third parties Interested creditors or third parties may fund litigation by the company in liquidation or indemnify it against adverse costs. However, this is not always appropriate because, for example: Creditors may be reluctant to throw good money after bad. The interest of each creditor may be insufficient to warrant risking large amounts of money. There is at least a risk that a party who funds litigation will be susceptible to a third party costs order, particularly if they are seen to be running the litigation (Dymocks Franchise Systems (NSW) Pty Ltd v Todd and others [2004] UKPC 39). (For more detail, see Practice note, Costs and non-parties to litigation.) Where a creditor or third party is prepared to fund a claim, the office-holder is not obliged to pursue it. The office-holder should consider the likely benefit to the company s creditors. If the office-holder agrees to pursue the claim, the basis on which the funding is provided is to be negotiated between the funder and the office-holder. It may be agreed, for example, that the funding is provided: By way of a loan. The repayment terms would also be negotiable. By the third party in return for an assignment of a share of the proceedings. (For more detail, see Assignment.) Adverse costs insurance ATE insurance may be obtained in return for a premium. ATE insurance is extremely useful for office-holders who wish to limit their risks. It may be essential in office-holder claims, unless there are creditors willing and rich enough to indemnify the office-holder. The insurance is likely to be limited to a particular amount, which may limit its usefulness in heavy litigation. ATE insurance premiums can be very expensive. If the premium is not recovered from the other side, its cost will eat into the monies available to the company s creditors. However, in principle, it is possible to insure the premium such that the premium is payable only in the event of success. In the future, the costs of ATE insurance premiums may cease to be recoverable from the opposing party. For more detail, see Practice note, After the event insurance: an overview: The future following Jackson s report on civil litigation costs. Assignment Assignment of a claim or of part of the claim may either: Incentivise a creditor or other third party to fund the litigation. Ensure that the company or office-holder is not at risk regarding litigation costs. A liquidator or administrator has a statutory power to sell assets of the company. To the extent that he properly exercises that power, he is immune from the law of champerty and maintenance. See Practice note, Champerty, maintenance and funding. An office-holder cannot assign any of the following: An office-holder claim (see What claims are available in corporate insolvency?). A claim which only arises on insolvency, such as a section 127 claim. A claim under section 874 of the Companies Act 2006 (Re Ayala Holdings [1996] 1 BCLC 467). 7

Litigation by insolvent companies: issues to consider before starting a claim There are various ways in which an assignment may be effected: If the company assigns a claim outright (that is, for cash), it will not thereafter be liable for the costs of any action taken by the assignee. This is the best route to avoid any further liability for the company or office-holder, but it may not realise the highest returns on the asset. If the company assigns the action in return for a share of the proceeds, there is a possibility that the company may remain liable for the costs of the action (because a third party costs order may be made against it). However, assuming that the assignee is good for the money, this should not be a problem. The company does not, itself, pursue the claim, so this reduces the burden on the officeholder, but at the cost of losing control over the litigation. The company may retain the cause of action but assign a share of its proceeds. Note that: A liquidator may not purport to assign his right to conduct proceedings in the name of the company, as this right is nonassignable (Ruttle Plant Ltd v Secretary of State for Environment (No 3) [2008] EWHC 238 (TCC)). A funder who has acquired an interest in the proceedings may be liable for the costs of the proceedings taken by the company to the extent of the funding provided (Arkin v Borchard Lines Ltd [2005] EWCA Civ 655). This may be the best option for an office-holder wishing to fund the claim while retaining control. It enables the funder to limit its exposure for costs. Choice of funding option There may be a dispute between creditors and the office-holder as to which funding option to take or whether to settle. This may be resolved by the liquidator applying to court for directions or by a challenge to his decision under section 167 of the IA 1986. Strategic considerations for defendants Security for costs A defendant should consider seeking security for costs at the earliest opportunity. The court has power to order that a claimant (or counterclaimant) provides security for the costs that will be incurred by the defendant (or respondent to counterclaim) (CPR 25.13). In most cases, the critical questions are likely to be: Whether the court is satisfied that there are no outside funds to meet the claim (for example, from shareholders or secured creditors). It will be for the claimant to persuade the court of this. Whether the defendant s conduct is or is alleged to be responsible for the company s insolvency. Unconnected third party defendants are likely to receive more sympathy from the court than directors defending claims for misappropriation of funds. For more detail, see Practice note, Security for costs against an insolvent company. Settlement and ADR It is probable that the claim has some merit if the office-holder has been able to secure insurance or third party funding, or has advisers acting on a CFA. Even if the claim is strong, however, settlement may be possible because: Insolvency practitioners tend to be risk averse and are, therefore, likely to want to settle at some stage. An office-holder will always be concerned whether there may be insufficient assets to pay his own costs and remuneration. The office-holder should be conscious of the need to obtain the best possible result for creditors. The longer litigation goes on (particularly where it is being carried out under a CFA), the greater the likelihood that the proceeds will end up being absorbed by costs. As with all litigation, the key is to consider your chances of successfully defending the claim as against the risk of irrecoverable costs. For general principles, see Practice note, Settlement: an overview. A defendant would be well-advised to make a settlement offer at an early stage. If the offer is made in accordance with CPR 36 (a Part 36 offer), the claimant is at risk regarding the defendant s costs and interest, if it does not accept the offer. For more detail, see Practice note, Part 36: an overview. 8

A good way to get the office-holder s attention is to make a good offer at an early stage and point out that, if they refuse it and continue the claim, they may get a worse result for creditors that they will have to justify to creditors. As in any litigation, it is wise to consider alternative dispute resolution (ADR) at an early stage, as this often encourages the parties to take a realistic view of their position, and may dispose of the claim. For more detail, see Practice note, An overview of mediation for the client. Defendants should always consider the possibility of offering to withdraw their own claim in the insolvency as part of settlement. This may, in practice, cost them little, but it may appeal to the office-holder, who may be keen not to have hostile creditors in the insolvency. When is sanction required for settlement of a claim? An administrator or liquidator does not generally require sanction to settle or compromise a claim (paragraph 18, Schedule 1 and paragraph 6A, Schedule 4, IA 1986). The exception is that a liquidator needs sanction to settle with a person claiming to be creditor with a claim against the company (paragraph 2, Schedule 4, IA 1986). A person dealing in good faith and for value is not concerned to enquire whether sanction has been given (rule 4.184, IR 1986). Counterclaim A defendant should always consider whether it may have a counterclaim. In the context of an insolvent company, a counterclaim may be particularly useful as the company may have difficulty funding its defence (which may be distinct from the claim). However, the defendant may need permission to bring its counterclaim against a company in compulsory liquidation or administration. See Practice note, Litigation and insolvency: claiming against an insolvent company. Can a potential defendant take an assignment of the claim against it? In principle, a claim can be assigned to the defendant. The IA 1986 does not require specific sanction in these circumstances but assigning a claim to the defendant may be regarded as a contentious step and may be regarded in substance as a settlement (see paragraph 24, Re Vol-Mec [2006] EWCA Civ 1688). An office-holder would be wise to seek directions from the court before effecting such an assignment. The court may sanction an assignment to the potential defendant if this is the best option available for the insolvent company s creditors (Re Vol-Mec and Official Receiver v Davis [1998] BPIR 771 (Bankruptcy)). Before agreeing to such an assignment the office-holder should take advice as he will need to be able to value of the claim (Faryab v Smith [2001] BPIR 246). Which types of claim are available in each insolvency procedure? In the table, references to sections are to the IA 1986 unless otherwise stated. Office-holder claims Type of claim Administration Administrative receivership Liquidation Provisional liquidation Fraudulent trading (section 213) Wrongful trading (section 214) Transactions at undervalue (section 238) Preference (section 239) Extortionate credit transaction (section 244) Transactions defrauding creditors (section 423) Claims that existed before the insolvency and may be brought by the company or the office-holder Type of claim Administration Administrative receivership Misfeasance claims (section 212) Liquidation Provisional liquidation 9

Litigation by insolvent companies: issues to consider before starting a claim Applications for delivery of property or records under section 234 Applications for delivery of property or payment of money to the company under section 237 Claims relating to the avoidance of transactions on the company s insolvency Type of claim Administration Administrative receivership Recovery of property under transactions that are void under section 127 Avoidance of floating charge (section 245) Avoidance of charge for non-registration (section 874, Companies Act 2006) Liquidation Provisional liquidation 10