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Provisional Liquidation

On occasions there will be a matter of great urgency in relation to a company, usually that its assets are in jeopardy. In such a case, an application can be made to the Court to seek the appointment of a Provisional Liquidator. At the time of making the application for a Provisional Liquidator, an application to appoint an Official Liquidator is also made.

The appointment of the Provisional Liquidator can be made by the Court upon the application of the company itself or its creditors. In making an application to the Court, evidence is put forward as to the financial state of the company and the reasons for the need to remove the directors from their positions. The stated reason may include:

* a shareholders dispute relating to the management of the company;
* evidence that the directors are not acting in the interests of the company.

It is the primary role of the Provisional Liquidator to take control of the company and to preserve its assets until hearing of the application to wind up the company. In the majority of cases, the process leads to an Official Liquidation, and it is usual for the liquidator to be the same person as the one appointed as Provisional Liquidator.

During the period of Provisional Liquidation the directors’ powers are withdrawn and there is a stay of proceedings so that no action or other civil proceedings may be begun against the company without the approval of the court.