Liquidators – using all of the tools in the toolbox

The Corporations Act 2001(Cth) (Corporations Act) requires a liquidator to take control of the company’s property on appointment.  To assist in this task Part 5.6 Division 3 (Sections 530A – 530C) of the Corporations Act arms the liquidator with several key tools.

Section 530A requires officers (and, usefully, former officers) to (among other things):

• attend on the liquidator and give him or her such information about the company's business, property, affairs and financial circumstances and attend such meetings of a company's creditors or members as the liquidator reasonably requires;
• deliver to the liquidator all books in the officer's possession that relate to the company (other than books the possession of which the officer is entitled, as against the company and the liquidator or to retain);
• tell the liquidator where other books relating to the company are, if the officer has that information; and
• do whatever the liquidator “reasonably requires” the officer to do to help in the winding up.  

Section 530B contains provisions specifically setting out the liquidator’s rights to obtain a company’s books at short notice (three days) to ascertain the affairs of the company.

In the case of either section 530A or 530B, a person must not (save in limited circumstances) fail to comply with a request made by a liquidator- the failure to comply with such a request is a strict liability office.

Finally, and perhaps of greatest significance, pursuant to section 530C a liquidator may apply to the court for a warrant authorising a specified person to:

• search for and seize the property or books of the company; and
• deliver, as specified in the warrant, property or books seized under it.

To obtain such an order the court must be satisfied that a person has concealed or removed property of a company and thereby prevented or delayed the liquidator or has concealed, destroyed or removed the books of the company or is about to do so. 

Once such an order has been made, the specified person has broad powers including breaking open a room or building where the books or property are, or are reasonably believed to be, in order to enforce the warrant.

Because of the punitive nature of this power, it will only be if the liquidator has taken all reasonable precautions to acquire the books and records by conventional means that the court may agree to authorising the issue of a warrant.

Further, the warrant may (but certainly will not always) include specific conditions as to (among other things):

• the timeframe (both the hours of the day, and the amount of time allowed) for execution of the warrant;
• the number of people who may attend at the property;
• whether any parties are required to supervise the attendance; and
• the requirement to list the documents removed,

and may require a personal undertaking from the liquidator.

Lavan Legal comment

While it is self-evidently preferable to obtain the cooperation of office holders in undertaking investigations into the affairs of a company, there is utility in knowing, and being prepared to exercise (if required and if funding permits) the rights set out in Part 5.6 of the Corporations Act.

In the case of section 530C the warrant can take a similar form and have similar effect to search and seizure orders.

As always, liquidators considering any court application should take appropriate advice as to scope of any orders sought, potential conditions and the position as to costs.