Key Functions and Procedures of Liquidators in UK and Cyprus
The role of a liquidator is central to the orderly winding up of an insolvent company, both in the United Kingdom and in Cyprus. While each jurisdiction operates under its own legislative framework, Cyprus’s Companies Law, Cap. 113—originally modeled on the UK Companies Act 1948—shares many core principles with the UK’s Insolvency Act 1986 (IA 1986), particularly regarding the powers conferred on liquidators and the procedures governing creditors’ meetings.
Although the legal foundations are closely aligned, it is important to acknowledge key distinctions in the modern application of insolvency law between the two jurisdictions:
- The UK’s IA 1986 introduced a more comprehensive and modernised insolvency regime, including tools such as administration, company voluntary arrangements (CVAs), and pre-pack sales—mechanisms not yet fully replicated in Cyprus.
- Cyprus continues to operate under a more traditional legal structure, with fewer statutory restructuring tools, although recent reforms (including the introduction of examinership and the regulation of insolvency practitioners) have begun to bridge this gap.
- Notably, court supervision in Cyprus remains more prominent, especially in compulsory liquidations, whereas the UK has moved towards a more streamlined and administrative approach.
Core Powers of a Liquidator
Under the UK’s IA 1986 (sections 165, 167, and Schedule 4), a liquidator is entrusted with wide-ranging powers designed to maximise recoveries and ensure fair distribution.
These include:
- Pay any class of creditors in full.
- Enter into compromises or arrangements with creditors.
- Compromise liabilities owed to or by the company and resolve matters affecting its assets or winding up.
- Initiate or defend legal proceedings.
- Continue or adopt prior legal proceedings.
- Operate the business if necessary for a beneficial winding up (e.g., to manage public risks).
- Sell company property publicly or privately, in whole or in part.
- Execute documents and use the company seal.
- Claim in the insolvency of contributories without set-off.
- Issue promissory notes or bills of exchange.
- Raise funds secured against company assets.
- Act in their official name to recover money from deceased contributories.
- Appoint agents for specific tasks, though not delegate their overall powers.
- Do all other acts necessary to complete the winding-up and distribute assets.
Distribution and Order of Payments
Once assets are realised, distribution follows a strict statutory order:
- Fixed charge holders
- Official receiver’s fees and expenses.
- Moratorium and priority pre-moratorium debts (if applicable)
- Expenses of winding up
- Preferential creditors
- Prescribed part
- Floating charges
- Unsecured creditors (pro rata)
- Shareholders (if surplus remains)
Dividends—whether interim or final—are paid to creditors who have submitted valid proofs of debt. It is rare in most liquidations for unsecured creditors to recover more than a small proportion of what they are owed.
While liquidators are granted broad powers to manage and wind up a company’s affairs, these powers must be exercised with transparency and in the best interests of creditors. Although formal approval is not always required—especially where actions are aimed at maximising asset recoveries—liquidators should maintain open communication with creditors, particularly where sensitive or disputed matters arise. Striking the right balance between efficiency and accountability is essential to a fair and effective liquidation process.
