BVI Court Issues Judgment Regarding Interim Payments to Court Appointed Liquidators on Account of Fees and Disbursements
In an order issued December 14, 2016, the Eastern Caribbean Supreme Court issued guidance on the following questions: Does the Court have power to permit liquidators appointed by the court pursuant to the Insolvency Act 2003 (the “Act”) to draw monies from a liquidation estate by way of interim payment on account of fees and disbursements yet to be incurred? If so, how should the Court’s discretion be exercised?
The Court concluded that it has power to approve payment to a Court appointed liquidator from a liquidation estate, interim on account of anticipated fees and expenses, in appropriate circumstances. It determined that this power is inherent in the Act and that the Act is flexible and purposive for meeting real and developing commercial needs (a feature also intentionally shared with the Business Companies Act 2004 and earlier companies legislation). The Court identified that there is a risk of putting the liquidator in a position where he would be required to fund the liquidation from his own resources, or put him or the estate to some other disadvantage or difficulty, and held that the Court is able to sanction a regime whereby its appointed liquidator can draw down funds from the liquidation estate on account of anticipated fees and disbursements. The Court observed that it should be kept in sight, however, that generally the Court’s supervisory function will best be carried out when it has full information and the Court will be astute to ensure that any such regime does not prejudice the estate, and may impose conditions. For approving remuneration, it will generally be necessary to have before the Court bills for work already done, but much will depend upon the circumstances of each liquidation. There will need to be an application to the Court supported by evidence demonstrating the circumstances that justify the Court granting permission for the draw down. The judgment does not apply to liquidators that are not appointed by the Court.
We are of a view that this judgment is particularly helpful guidance to Court appointed liquidators particularly in large appointments where a firm’s cash flow may be impacted adversely while waiting for fees to be approved.