Provisional Liquidation in England and Wales vs. Scotland: A Comparative Analysis of Availability and Benefits

Provisional Liquidation is a rare beast in England and Wales but it is much more common in Scotland. In this article, I will take a look at the availability of a provisional appointment north of the border in compulsory liquidations and point out the advantages it offers.

In England and Wales, the Courts are generally only willing to entertain an application for a provisional appointment in exceptional cases, normally where there is a need to protect specific assets. The Courts in England are often reluctant to make a provisional appointment unless there is a significant risk to the Company’s assets, potential loss or destruction of the Company’s books or a public interest reason for the appointment. It is not a common occurrence at all.

In Scotland, however, the appointment of Provisional Liquidators is much more common. Indeed, it is even routine in certain circumstances. The Scottish Courts are of course mindful that a provisional appointment is a significant step and is likely to be damaging to the Company’s business, especially where a Winding up Order is not ultimately granted. Nevertheless, they are much more willing to make provisional appointments, especially in cases where the Winding-Up Petition is brought by the Company or its Directors. In these “Director – led” Petitions, the Court will be often be persuaded that a provisional appointment is justified on the basis that the provisional appointment will benefit employees and enable stock and assets to be secured.  Such an appointment is also to the benefit of Directors who may be concerned about continuing to trade the Company whilst it is insolvent pending the Winding-Up Order being made.  The Scottish Courts will often restrict the Provisional Liquidator’s powers to carrying on the business of the Company but can be persuaded to extend those powers to include powers to sell assets if there is a clear need to do so.  However, time limits will often be applied by the Courts in those circumstances.

The easier availability of provisional appointments, especially in Director led Petitions is a useful addition to the insolvency tool kit north of the border.  It is a step that I always consider recommending for Directors where Liquidation is inevitable and there are concerns about the Company trading whilst insolvent.

Find out more about our Debt Recovery services here.