Insolvency Act 1986, section 166

Creditors’ voluntary winding up

Part IV Winding Up of Companies Registered under the Companies Acts

(1)This section applies where, in the case of a creditors’ voluntary winding up, a liquidator has been nominated by the company.

[F346 (1A)The exercise by the liquidator of the power specified in paragraph 6 of Schedule 4 to this Act (power to sell any of the company's property) shall not be challengeable on the ground of any prior inhibition.F346]

(2)The powers conferred on the liquidator by section 165 shall not be exercised, except with the sanction of the court, [F347before—

(a)the company's creditors under section 100 nominate a person to be liquidator, or

(b)the procedure by which the company's creditors were to have made such a nomination concludes without a nomination having been made.F347]

(3)Subsection (2) does not apply in relation to the power of the liquidator—

(a)to take into his custody or under his control all the property to which the company is or appears to be entitled;

(b)to dispose of perishable goods and other goods the value of which is likely to diminish if they are not immediately disposed of; and

(c)to do all such other things as may be necessary for the protection of the company’s assets.

F348(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)[F349 If the directors fail to comply with—

( a)section 99(1), (2) or (2A), or

(b)section 100(1B),F349]

the liquidator shall, within 7 days of the relevant day, apply to the court for directions as to the manner in which that default is to be remedied.

(6) “The relevant day” means the day on which the liquidator was nominated by the company or the day on which he first became aware of the default, whichever is the later.

(7)If the liquidator without reasonable excuse fails to comply with this section, he is liable to a fine.

Definitions used in section 166 1

the company

2 Section 233B does not apply in relation to a contract for the supply of goods or services to a company (“the company”) where any of paragraphs 3 to 11 applies.

Defined in Sch.4ZZA para.2 · see it in the full Act

Cases considering section 166 8

Wesellcnc.Com Ltd, Re

[2013] EWHC 4577 (Ch) · 12 December 2013Limits

The court treated section 166 as authorising directions concerning defaults under sections 98 and 99 and as supporting the relief granted in relation to the defective winding up. It also considered the relationship between the statutory application requirement and the court’s power to give practical directions (see paras [4]; [11]; [15]). Section 166(2) was applied to grant retrospective sanction for the liquidator’s acts, because his powers may not technically have been exercisable without the court’s sanction (see para [14]). Section 166(5) was interpreted as requiring an application within seven days of the relevant day, but as permitting the court to give practical directions rather than requiring literal repetition of omitted procedures. It formed the statutory basis for the relief granted (see paras [4]; [6]; [11]; [15]). Section 166(6) was applied to identify the relevant day as the later of the liquidator’s nomination or his first awareness of the default. The liquidator’s awareness arose when he understood the consequences of the late declaration of solvency (see paras [5]; [6]). Section 166(7) was considered in relation to the default fine. The court accepted that the absence of any need for directions could amount to a reasonable excuse, or that the fine might apply only to other mandatory requirements (see para [11]).

Southern Pacific Personal Loans Ltd, Re

[2013] EWHC 2485 (Ch) · 8 August 2013Interprets

Confirms the liquidator’s duty and power to take company property into custody or control and protect company assets, without transferring ownership to the liquidator. (see paras [31]-[32])

Business Dream Ltd, Re Insolvency Act 1986

[2011] EWHC 2860 (Ch) · 2 November 2011Limits

Applied as the proposed source of the court’s sanction for the purported liquidator’s sale and disclaimer. Because the appointment was void, the court had no jurisdiction to grant the sanction. Interpreted, obiter, as protecting creditors before the section 98 meeting. Consent by the creditor with the greatest financial interest would be a powerful factor in sanctioning an urgent transaction, subject to concerns about connected parties and inadequate evidence.

What each judgment says about section 166 is in the case-law panel in the full Act.

Amendments and notes

7 notes from legislation.gov.uk

Amendments

  1. F346S. 166(1A) inserted (S.) (22.4.2009) by Bankruptcy and Diligence etc. (Scotland) Act 2007 (asp 3), ss. 155(3), 227(3) (with s. 223); S.S.I. 2009/67, art. 3(a) (with arts. 5, 6); as amended by S.S.I. 2011/31, art. 5
  2. F347Words in s. 166(2) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force, 6.4.2019 for S. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 40(2); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3); S.I. 2019/816, reg. 4(c) (with reg. 5)
  3. F348S. 166(4) omitted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force, 6.4.2019 for S. in so far as not already in force) by virtue of Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 40(3); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3); S.I. 2019/816, reg. 4(c) (with reg. 5)
  4. F349Words in s. 166(5) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force, 6.4.2019 for S. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 40(4); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3); S.I. 2019/816, reg. 4(c) (with reg. 5)

Modifications

  1. C452Ss. 163-167 applied (with modifications) (4.1.2024) by S.I. 2021/716, Sch. 1 para. 3 (as amended by The Payment and Electronic Money Institution Insolvency (Amendment) Regulations 2023 (S.I. 2023/1399), regs. 1(2), 20)
  2. C458S. 166 applied (with modifications) (S.) (6.4.2001) by S.S.I. 2001/128, reg. 4(1), Sch. 2
  3. C459S. 166(5) modified (S.) (6.4.2001) by S.S.I. 2001/128, reg. 4(2), Sch. 3