The company liquidation process in Scotland

How does the company liquidation process in Scotland differ from the rest of the UK? Lucy McCann and Louise Laing ofBrodies LLPexplain.

The liquidation process for companies is broadly similar north and south of the border. This is because the substantive law in both jurisdictions is based on the Insolvency Act 1986. However, important procedural differences arise as a result of the Insolvency (Scotland) Rules 1986, which regulate company liquidations in Scotland.

From 30 May 2014, the Scottish Rules were amended, removing the application of provisions from the Scottish bankruptcy legislation to liquidations. However, the amendments do not apply to liquidations that took effect before 30 May 2014, for which relevant bankruptcy provisions are still imported by the Scottish Rules.

Though lacking the detail of their English counterparts, the Scottish Rules put meat on the bones of the Insolvency Act 1986, and further amendments are proposed. 

In both England and Scotland:

  • the same parties can apply to court to have a company wound up
  • the definition of inability to pay debts is the same, but statutory demands must be served using Scottish forms
  • the company’s share capital will determine which court should hear the application
  • the appointment of a provisional liquidator can be sought to safeguard the assets of the company, pending the court’s determination of the application
  • the role of the liquidator to investigate the company’s dealings, and to ingather and realise assets, is the same

Key differences are that:

  • there is no official receiver in Scotland, so an insolvency practitioner must be nominated to take the appointment when an application is presented
  • when a winding-up order is granted, the court must appoint an interim liquidator when the order is made. The interim liquidator must hold a meeting of creditors within 28 days to seek the appointment of a liquidator
  • interested parties can lodge caveats with the Scottish courts, entitling them to be given notice before the court makes any interim (immediate) order against a company. The caveat is triggered when an application to wind up is presented to the court
  • a Scottish liquidator cannot disclaim onerous property, meaning that no insolvency practitioner may be willing to accept the appointment if the company’s assets include such property
  • the process for approving a liquidator’s fees and outlays should comply with the relevant procedures, as should any insolvency practitioner who is not familiar with the Scottish Rules

In order to understand the liquidation process in Scotland, you need to understand the Scottish Rules and their interaction with the corporate and (where appropriate) the personal regimes.

About the author

Lucy McCann is a senior solicitor in the business disputes and asset recovery team at Brodies LLP, and Louise Laing is an associate in the corporate, restructuring and insolvency team at Brodies LLP. For more information, visit Brodies LLP, or follow on Twitter @brodiesllp.