Liquidators’ Powers: An exercise of a Liquidator’s powers cannot be retrospectively authorised

Pursuant to section 144(1) of the Insolvency, Restructuring and Dissolution Act 2018, a Liquidator may, after authorisation by the Court or the committee of inspection amongst others:

1. Carry on the business of the company for the winding up of the company;
2. Make a compromise or arrangement with creditors;
3. Compromise calls and liabilities;
4. Bring or defend any action in the name of the company; and
5. Appoint a solicitor to assist the Liquidator or bring or defend any action of legal proceeding in the name of the company.

This means that various powers of a Liquidator in a compulsory winding up situation can only be exercised if the High Court or the Committee of Inspection has provided authorisation.

In Re Kirkham International Pte Ltd (in compulsory liquidation) [2023] 5 SLR 635, the High Court said that section 144(1)(f) made it mandatory for authorisation by the Court or the committee of inspection before the liquidator can exercise his power to appoint a solicitor.

In other words, this means that the Court cannot retrospectively authorise a Liquidator’s appointment of solicitors when approval is sought under section 144 and authorisation only takes effect after the order of the Court.

This is borne out in the clear language of section 144(1) which uses the words “after authorisation”.

The factors which a Court or Committee of Inspection would take into account in deciding whether to authorise the appointment of a solicitor includes:

1. The general need to appoint a solicitor;
2. The impact of legal fees on the assets of the estate;
3. Whether the solicitor was in a position of conflict; and
4. Whether an objection was raised by members of the COI or creditors.

The threshold for authorisation is not high but authorisation is not granted as a matter of course if the creditors do not object.

However, this does not mean that the absence of authorisation renders proceedings incompetent. The absence of authorisation only places in issue the question whether the Liquidator should be entitled to costs out of the estate for the solicitors’ fees.

This would apply directly to situations where a Liquidator may in a rush, where there is an urgent timeline to bring or defend against an action and it is not feasible to obtain authorisation from the Court or committee of approval first.

This publication is not intended to be, nor should it be taken as, legal advice. It is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking any action(s) based on this publication. We shall not be responsible for, nor do we accept any responsibility for, any loss or damage that may arise from any reliance on this publication.