Preferential debts 175. Preferential debts (general provision)
176. Preferential charge of goods distrained(1) In a winding up the company's preferential debts (within the meaning given by section 386 in Part XII) shall be paid in priority to all other debts.
(2) Preferential debts -
(a) rank equally among themselves after the expenses of the winding up and shall be paid in full, unless the assets are insufficient to meet them, in which case they abate in equal proportions; and
(b) so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures secured by, or holders of, any floating charge created by the company, and shall be paid accordingly out of any property comprised in or subject to that change.
(1) This section applies where a company is being wound up by the court in England and Wales, and is without prejudice to section 128 (avoidance of attachments, etc.).
(2) Where any person (whether or not a landlord or person entitled to rent) has distrained upon the goods or effects of the company in the period of 3 months ending with the date of the winding-up order, those goods or effects, or the proceeds of their sale, shall be charged for the benefit of the company with the preferential debts of the company to the extent that the company's property is for the time being sufficient for meeting them.
(3) Where by virtue of a charge under subsection (2) any person surrenders any goods or effects to a company or makes a payment to a company, that person ranks, in respect of the amount of the proceeds of sale of those goods or effects by the liquidator or (as the case may be) the amount of the payment, as a preferential creditor of the company, except as against so much of the company's property as is available for the payment of preferential creditors by virtue of the surrender or payment.
Special managers 177. Power to appoint special manager
(1) Where a company has gone into liquidation or a provisional liquidator has been appointed, the court may, on an application under this section, appoint any person to be the special manager of the business or property of the company.
(2) The application may be made by the liquidator or provisional liquidator in any case where it appears to him that the nature of the business or property of the company, or the interests of the company's creditors or contributories or members generally, require the appointment of another person to manage the company's business or property.
(3) The special manager has such powers as may be entrusted to him by the court.
(4) The court's power to entrust powers to the special manager includes power to direct that any provision of this Act that has effect in relation to the provisional liquidator or liquidator of a company shall have the like effect in relation to the special manager for the purposes of the carrying out by him of the functions of the provisional liquidator or liquidator.
(5) The special manager shall -
(a) give such security or, in Scotland caution as may be prescribed;
(b) prepare and keep such accounts as may be prescribed;
produce those accounts in accordance with the rules to the Secretary of State or to such other persons as may be prescribed.
Disclaimer (England and Wales) 178. Power to disclaim onerous property
179. Disclaimer of leaseholds(1) This and the next two sections apply to a company power that is being wound up in England and Wales.
(2) Subject as follows, the liquidator may, by the giving of the prescribed notice, disclaim any onerous property and may do so notwithstanding that he has taken possession of it, endeavoured to sell it, or otherwise exercised rights of ownership in relation to it.
(3) The following is onerous property for the purposes of this section -
(a) any unprofitable contract, and
(b) any other property of the company which is unsaleable or not readily saleable or is such that it may give rise to a liability to pay money or perform any other onerous act.
(4) A disclaimer under this section -
(a) operates so as to determine, as from the date of the disclaimer, the rights, interests and liabilities of the company in or in respect of the property disclaimed;
(b) does not, except so far as is necessary for the purpose of releasing the company from any liability, affect the rights or liabilities of any other person.
(5) A notice of disclaimer shall not be given under this section in respect of any property if -
(a) a person interested in the property has applied in writing to the liquidator or one of his predecessors as liquidator requiring the liquidator or that predecessor to decide whether he will disclaim or not, and
(b) the period of 28 days beginning with the day on which that application was made, or such longer period as the court may allow, has expired without a notice of disclaimer having been given under this section in respect of that property.
(6) Any person sustaining loss or damage in consequence of the operation of a disclaimer under this section is deemed a creditor of the company to the extent of the loss or damage and accordingly may prove for the loss or damage in the winding up.
180. Land subject to rent charge(1) The disclaimer under section 178 of any property of a leasehold nature does not take effect unless a copy of the disclaimer has been served (so far as the liquidator is aware of their addresses) on every person claiming under the company as underlessee or mortgaged and either -
(a) no application under section 181 below is made with respect to that property before the end of the period of 14 days beginning with the day on which the last notice served under this subsection was served; or
(b) where such an application has been made, the court directs that the disclaimer shall take effect.
(2) Where the court gives direction under subsection (1)(b) it may also, instead of or in addition to any order it makes under section 181, make such orders with respect to fixtures, tenant's improvements and other matters arising out of the lease as it thinks fit.
181. Powers of court (general)(1) The following applies where, in consequence of the disclaimer under section 178 of any land subject to a rent charge, that land vests by operation of law in the Crown or any other person (referred to in the next subsection as "the proprietor").
(2) The Proprietor and the successors in title of the proprietor are not subject to any personal liability in respect of any sums becoming due under the rent charge except sums becoming due after the proprietor, or some person claiming under or through the proprietor, has taken possession or control of the land or has entered into occupation of it.
182. Powers of court (leaseholds)(1) This section and the next apply where the liquidator has disclaimed property under section 178.
(2) An application under this section may be made to the court by -
(a) any person who claims an interest in the disclaimed property, or
(b) any person who is under any liability in respect of the disclaimed property, not being a liability discharged by the disclaimer.
(3) Subject as follows, the court may on the application make an order, on such terms as it thinks fit, for the vesting of the disclaimed property in, or for its delivery to -
(a) a person entitled to it or a trustee for such a person, or
(b) a person subject to such a liability as is mentioned in sub- section (2)(b) or a trustee for such a person.
(4) The court shall not make an order under subsection (3)(b) except where it appears to the court that it would be just to do so for the purpose of compensating the person subject to the liability in respect of the disclaimer.
(5) The effect of any order under this section shall be taken into account in assessing for the purpose of section 178(6) the extent of any loss or damage sustained by any person in consequence of the disclaimer.
(6) An order under this section vesting property in any person need not be completed by conveyance, assignment or transfer.
(1) The court shall not make an order under section 181 vesting property of a leasehold nature in any person claiming under the company as underlessee or mortgage except on terms making that person -
(a) subject to the same liabilities and obligations as the company was subject to under the lease at the commencement of the winding up, or
(b) if the court thinks fit, subject to the same liabilities and obligations as that person would be subject to if the lease had been assigned to him at the commencement of the winding up.
(2) For the purposes of an order under section 181 relating to only part of any property comprised in a lease, the requirements of sub- section (1) apply as if the lease comprised only the property to which the order relates.
(3) Where subsection (1) applies and no person claiming under the company as underlessee or mortgage is willing to accept an order under section 181 on the terms required by virtue of that sub- section, the court may, by order under that section, vest the company's estate or interest in the property in any person who is liable (whether personally or in a representative capacity, and whether alone or jointly with the company) to perform the lessee's covenants in the lease.
The court may vest that estate and interest in such a person freed and discharged from all estates, incumbrances and interests created by the company.
(4) Where subsection (1) applies and a person claiming under the company as underlessee or mortgage declines to accept an order under section 181, that person is excluded from all interest in the property.
Execution, attachment and the Scottish equivalents 183. Effect of execution or attachment (England and Wales)
184. Duties of sheriff (England and Wales)(1) Where a creditor has issued execution against the goods or land of a company or has attached any debt due to it, and the company is subsequently wound up, he is not entitled to retain the benefit of the execution or attachment against the liquidator unless he has completed the execution or attachment before the commencement of the winding up.
(2) However -
(a) if a creditor has had notice of a meeting having been called at which a resolution for voluntary winding up is to be proposed, the date on which he had notice is substituted, for the purpose of sub- section (1), for the date of commencement of the winding up;
(b) a person who purchases in good faith under a sale by the sheriff any goods of a company on which execution has been levied in all cases acquires a good title to them against the liquidator; and
(c) the rights conferred by subsection (1) on the liquidator may be set aside by the court in favour of the creditor to such extent and subject to such terms as the court thinks fit.
(3) For purposes of this Act -
(a) an execution against the goods is completed by seizure and sale, or by the making of a charging order under section 1 of the Charging Orders Act 1979;
(b) an attachment of a debt is completed by receipt of the debt; and
(c) an execution against land is completed by seizure, by the appointment of a receiver, or by the making of a charging order under section 1 of the Act above mentioned.
(4) In this section "goods" includes all chattels personal; and "the sheriff" includes any officer charged with the execution of a writ or other process.
(5) This section does not apply in the case of a winding up in Scotland.
185. Effect of diligence (Scotland)(1) The following applies where a company's goods are taken in execution and, before their sale or the completion of the execution (by the receipt or recovery of the full amount of the levy), notice is served on the sheriff that a provisional liquidator has been appointed or that a winding-up order has been made, or that a resolution for voluntary winding up has been passed.
(2) The sheriff shall, on being so required, deliver the goods and any money seized or received in part satisfaction of the execution to the liquidator; but the costs of execution are a first charge on the goods or money so delivered, and the liquidator may sell the goods, or a sufficient part of them, for the purpose of satisfying the charge.
(3) If under an execution in respect of a judgment for a sum exceeding £250 a company's goods are sold or money is paid in order to avoid sale, the sheriff shall deduct the costs of the execution from the proceeds of sale or the money paid and retain the balance for 14 days.
(4) If within that time notice is served on the sheriff of a petition for the winding up of the company having been presented, or of a meeting having been called at which there is to be proposed a resolution for voluntary winding up, and an order is made or a resolution passed (as the case may be), the sheriff shall pay the balance to the liquidator, who is entitled to retain it as against the execution creditor.
(5) The rights conferred by this section on the liquidator may be set aside by the court in favour of the creditor to such extent and subject to such terms as the court thinks fit.
(6) In this section "goods" includes all chattels personal; and "the sheriff" includes any officer charged with the execution of a writ or other process.
(7) The money sum for the time being specified in subsection (3) is subject to increase or reduction by order under section 416 in Part XV.
(8) This section does not apply in the case of a winding up in Scotland.
(1) In the winding up of a company registered in Scotland, the following provisions of the Bankruptcy (Scotland) Act 1985 -
(a) subsections (1) to (6) of section 37 (effect of sequestration on diligence); and
(b) subsections (3), (4), (7) and (8) of section 39 (realisation of estate),
apply, so far as consistent with this Act, in like manner as they apply in the sequestration of a debtor's estate, with the substitutions specified below and with any other necessary modifications.
(2) The substitutions to be made in those sections of the Act of 1985 are as follows -
(a) for references to the debtor, substitute references to the company;
(b) for references to the sequestration, substitute references to the winding up;
(c) for references to the date of sequestration, substitute references to the commencement of the winding up of the company; and
(d) for references to the permanent trustee, substitute references to the liquidator.
(3) In this section, "the commencement of the winding up of the company" means, where it is being wound up by the court, the day on which the winding-up order is made.
(4) This section, so far as relating to any estate or effects of the company situated in Scotland, applies in the case of a company registered in England and Wales as in the case of one registered in Scotland.
Miscellaneous matters 186. Rescission of contracts by the court
187. Power to make over assets to employees(1) The court may, on the application of a person who is, against the liquidator, entitled to the benefit or subject to the burden of a contract made with the company, make an order rescinding the contract on such terms as to payment by or to either party of damages for the non-performance of the contract, or otherwise as the court thinks just.
(2) Any damages payable under the order to such a person may be proved by him as a debt in the winding up.
(1) On the winding up of a company (whether by the court or voluntarily), the liquidator may, subject to the following provisions of this section, make any payment which the company has, before the commencement of the winding up, decided to make under section 719 of the Companies Act (power tp provide for employees or former employees on cessation or transfer of business).
(2) The power which a company may exercise by virtue only of that section may be exercised by the liquidator after the winding up has commenced if, after the company's liabilities have been fully satisfied and provision has been made for the expenses of the winding up, the exercise of that power has been sanctioned by such a resolution of the company as would be required of the company itself by section 719(3) before that commencement, if paragraph (b) of that subsection were omitted and any other requirement applicable to its exercise by the company had been met.
(3) Any payment which may be made by a company under this section (that is, a payment after the commencement of its winding up) may be made out of the company's assets which are available to the members on the winding up.
(4) On a winding up by the court, the exercise by the liquidator of his powers under this section is subject to the court's control, and any creditor or contributory may apply to the court with respect to any exercise or proposed exercise of the power.
(5) Subsections (1) and (2) above have effect notwithstanding anything in any rule of law or in section 107 of this Act (property of company after satisfaction of liabilities to be distributed among members).