Can You Sue A Company In Voluntary Liquidation?

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If you believe you have grounds to make a claim against a company but then find out they have gone into liquidation, one of the questions you may have is, ‘can you sue a company in voluntary liquidation?’. The very short answer to this question is yes, you can. However, there are many hurdles to cross when a company enters voluntary liquidation that can make it difficult to get your claim heard and processed. As a result, it is often not a commercially worthwhile pursuit.

In order to shed more light on the topic of ‘can you sue a company in voluntary liquidation’, let’s take a closer look at how the process works.

How Can You Sue A Company In Voluntary Liquidation?

When a company enters a Members’ Voluntary Liquidation (MVL) or a Creditors’ Voluntary Liquidation (CVL), all their assets are put under the control of an appointed liquidator or creditor. Whilst there is no automatic restriction against suing the company during this process, if the company is protected by a court stay, this can make it very difficult.

During the liquidation process, the liquidator may apply for a court stay that imposes a halt on court proceedings against the company unless allowed by the court. In this case, in order to sue the company, you would need to apply for court leave in order for proceedings to commence. It is within the courts’ discretionary power to impose a stay at any point or to lift it and grant leave at the request of the liquidator or creditor. As a result, it can be very challenging to get a claim heard in court, with the outcome varying on a case-by-case basis. This is why the answer to the question ‘can you sue a company in voluntary liquidation’ is unfortunately not black and white.

Where the claim being pursued can be dealt with just as conveniently within the process of the liquidation, the court will apply certain factors to ensure that none of the creditors obtain an unfair advantage over other creditors.

Company Voluntary Arrangements (CVA)

The position that is taken will depend on the terms of the CVA that binds creditors who voted on the proposal. Some companies may have signed a moratorium that prevents legal proceedings against the company from being commenced or continued. This is another factor to take into account if you’re thinking about ‘can you sue a company in voluntary liquidation’.

Consult A Professional For Help Before Proceeding

Whilst we’ve determined that the answer to the question ‘can you sue a company in voluntary liquidation’ is yes, as we’ve highlighted, making a claim against a company in liquidation can be challenging. Although you may be able to bring an action into court, this will not necessarily be commercially worthwhile. Even if a court judgment is obtained, there is no guarantee that payment will be obtained as this very much depends on the financial circumstances of the company in question.

If the company had insurance in place, it may be possible to take action against the insurers directly under the Third Party (Rights Against Insurers) Act 2010. This allows a third party to proceed directly against the company’s insurer without obtaining a court order or arbitration award beforehand.

In any case, you should always consult professional help when considering suing a company in voluntary liquidation to ensure that you proceed in a financially viable way.

Hopefully, you’re not still wondering can you sue a company in voluntary liquidation, but if you then please don’t hesitate to get in touch with our friendly and knowledgeable team.

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