In his latest Coffee Break Briefing, insolvency expert, Malcolm Niekirk, looks at special managers, provisional liquidators and interim receivers, including when they can be appointed and what powers they may have.
In case you missed it, you can watch the full video here or read our summary article below.
What is a company in a contingent state?
When a winding-up petition is running, a company in a contingent state. Simultaneously it is both in liquidation and not in liquidation. Usually the court will make a winding-up order. In those cases, the “relation back” rule means that the company was in liquidation from the date the petition was presented.
But, sometimes the court dismisses the petition. In those cases, the company was never in liquidation.
What are the implications of this contingent state?
While a winding up petition is running, to protect the company’s assets:
- Litigation can be stayed by court order.
- Creditor enforcement can be stayed and may be void.
- Property dispositions may be void.
- Directors’ powers continue until liquidation, although they are subject to restrictions and additional duties.
- The court may appoint a provisional liquidator.
When can a provisional liquidator be appointed?
A provisional liquidator can be appointed after a winding-up petition has been presented and before a winding-up order is made (ss 135(1)-(2) Insolvency Act 1986).
The court may appoint the official receiver or any other “fit person” (an insolvency practitioner).
The powers of a provisional liquidator are limited to those specifically granted by the court. They do not automatically have the powers contained in Schedule 4 to the Insolvency Act 1986.
The court order appointing the provisional liquidator may also place limits on those powers.
Provisional liquidator to special manager – a way to preserve continuity?
When a winding-up order is made, the official receiver becomes the liquidator, even if the court previously appointed an insolvency practitioner as provisional liquidator. The winding up order ends the provisional liquidator’s appointment.
So the court may appoint the insolvency practitioners who were the provisional liquidators to be special managers, to help maintain continuity when the official receiver’s appointment starts.
What is an interim receiver (in bankruptcy)?
In bankruptcy cases an interim receiver performs a similar role to a provisional liquidator. They help protect and preserve the debtor’s estate while the bankruptcy petition is running.
When can an interim receiver be appointed?
The court can appoint an interim receiver after a creditor’s bankruptcy petition has been presented and before a bankruptcy order is made.
The court can appoint the official receiver or an insolvency practitioner as interim receiver.
Interim receiver to special manager – a way to preserve continuity?
When a bankruptcy order is made, the official receiver becomes the trustee in bankruptcy. This means that the court may then be willing to appoint the insolvency practitioners who were interim receivers to continue under a new appointment, as special managers. This helps maintain continuity of management.
How is the estate protected?
The appointment of an interim receiver provides additional protection for the estate while the bankruptcy petition is pending.
Litigation and enforcement can be stayed as if a bankruptcy order had already been made.
Creditors may require the permission of the court to continue with actions.
How is an interim receiver appointed?
An interim receiver is appointed by court order following an application by a creditor, the debtor or a temporary administrator.
The application must explain why the appointment is necessary. The court will also require the proposed insolvency practitioner’s consent to act and appropriate security, usually in the form of a bond.
What powers does an interim receiver have?
The powers of the interim receiver are those of a High Court-appointed receiver or manager and are defined by the court order appointing them.
Their remuneration is also set by the court.
What is a special manager?
A special manager is appointed by the court.
An application for appointment can be made by:
- a provisional liquidator;
- a liquidator;
- an interim receiver; or
- a trustee in bankruptcy.
A special manager may appointed before or after a bankruptcy or winding-up order (but always after the petition has started running).
Why are special managers appointed?
There are several reasons why a special manager may be appointed.
These include:
- keeping skills and experience in place when a trustee or liquidator is appointed;
- providing specialist expertise required for a particular business or property; and
- protecting the interests of creditors, contributories or members.
When can special managers be useful?
Special managers can be particularly useful in large or complex insolvencies where the liquidator or trustee requires additional resources or specialist knowledge.
For example, they may help to keep a business operating while options for its future are considered, preserve the value of assets or work in progress, manage complex trading operations, or provide expertise that the office holder does not have.
They can also provide continuity where the business requires active management during the insolvency process.
What powers does a special manager have?
The powers of a special manager are set by the court order appointing them and vary from case to case.
The powers can include any of the statutory powers available to a liquidator or trustee.
In Specialised Steel (2025), the court granted powers to the special managers that were broadly equivalent to the powers of administrators.
The court also sets the special manager’s remuneration. It may be reviewed and fixed from time to time.
The court sets the duration of the appointment.
The special managers’ panel
There were a few, very high profile, special manager appointments in 2018 and 2019. After that, the official receiver set up a panel of firms with the expertise and resources to take on cases like that.
The panel was retendered in September 2024 and now includes ten firms.
The current arrangements are in place until the end of 2026 (perhaps 2027). I’ve not seen any announcement about whether the panel will continue. Those high profile cases do not seem to have started a trend.
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