Provisional liquidation

[1] (The provisional liquidator is appointed to safeguard the assets of the company and maintain the status quo pending the hearing of the petition.)

[2] In practice most instances of applications for a provisional liquidator involve some type of allegation of fraud or other misconduct relating to the company.

Normally this is because the assets must face a high risk of dissipation or there must be some other urgent reason why a liquidator is required for the interim period.

[8] One of the common functions of a provisional liquidator is to investigate whether the company's property has been misappropriated or its business has been wrongfully conducted.

[2] Under British Virgin Islands law provisional liquidation is regulated by section 170(4) of the Insolvency Act 2003.

[13] In the Cayman Islands, provisional liquidation is principally regulated by section 104(3) of the Companies Law (2013) Revision.

Since the decision in the Legend case in 2006[19] provisional liquidation may not be used as a means of shielding the company from creditor's claims to facilitate a restructuring in Hong Kong,[16] although prior to that date the practice was relatively common.

[20] In the United Kingdom the power to appoint a provisional liquidator is found in section 135(1), of the Insolvency Act 1986, and it is regarded as an "emergency procedure".

In practice most instances of applications for a provisional liquidator involve some kind of fraud or other misconduct.

[25] Because of the emergency nature of the remedy applications for provisional liquidation are very often made urgently and without giving notice to the company.