Wesellcnc.Com Ltd, Re

Where a creditors’ voluntary winding up has proceeded without the required creditors’ meeting or statement of affairs, the court may extend the statutory time for applying for directions under section 166(5) of the Insolvency Act 1986. The power under Rule 4.3 of the Insolvency Rules 1986 is not restricted by the narrower power to extend time under CPR 3.1(2)(a). The court may give directions that do not literally recreate the omitted procedures where the defaults caused no prejudice, the liquidation is substantially complete, and compliance would be pointless. In such circumstances, the court may dispense with the creditors’ meeting and statement of affairs, declare the correct character of the winding up, and retrospectively sanction the liquidator’s acts.

The liquidator applied under section 166 of the Insolvency Act 1986 after discovering that a purported members’ voluntary winding up had been commenced without a declaration of solvency in place. It was therefore a creditors’ voluntary winding up, but no creditors’ meeting had been summoned and no statement of affairs had been prepared. The application was made more than seven days after the liquidator became aware of the defaults, although it was made promptly after receiving counsel’s advice. The company was solvent, all creditors had been paid in full, distributions had been made to shareholders, and the liquidation was practically complete. The central issues were whether time could be extended and what directions were appropriate.

1. Extension of time. The liquidator became aware of the defaults when he understood that the late declaration of solvency meant that the liquidation was a creditors’ voluntary winding up. The application was therefore technically out of time under section 166(5) and (6) of the Insolvency Act 1986.
2. CPR 3.1(2)(a), incorporated by Rule 7.51A of the Insolvency Rules 1986, could not extend a time limit imposed by the Act. However, Rule 4.3 gave the court power to extend any time limited by a provision about winding up, before or after expiry, on just terms. Section 166(5) fell within that description.
3. The discretion was exercised because the liquidator had acted in good faith, acted promptly after obtaining specialist advice, and no person had suffered prejudice. All creditors had been paid and the liquidation had a substantial surplus.
4. The court was empowered by section 166(5) to give directions as to how the defaults should be remedied, but was not required to order a literal repetition of procedures that had become pointless. The court could dispense with the creditors’ meeting and the laying of the statement of affairs. This approach was supported by Re Salcombe Hotel Development Co Ltd (1989) 5 B.C.C. 807 and, in a different context, re UK Coal Operations Limited [2013] EWHC 2581 (Ch).
5. The liquidation was declared to be a creditors’ voluntary winding up. Retrospective sanction was granted for the liquidator’s acts under section 166(2), the requirement for a creditors’ meeting was dispensed with, and the orders sought by the liquidator were made. The liquidator did not seek his costs.

First-instance decision. No prior appellate decision is stated in the judgment.