The company liquidation process in Scotland

How does the company liquidation process in Scotland differ from the rest of the United Kingdom? Iain Penman and Louise Laing of Brodies LLP explain.

Company Liquidation in Scotland

How does the liquidation process differ in Scotland to England and Wales?

The liquidation process for companies is broadly similar north and south of the border.  In both jurisdictions, the Insolvency Act 1986 is the governing statute and the new Scottish Corporate Insolvency Rules were drafted very much to mirror, as far as possible, the Insolvency Rules for England and Wales. However, Scotland has a separate legal system and there are still some important differences in the statutory provisions and rules applicable north and south of the border.

In both England/Wales 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 and consent to take the appointment when a petition 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 within 28 days seek nominations from the company's creditors and contributories for the purpose of choosing 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. A caveat is triggered when an application to appoint a provisional liquidator 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 involves the retrospective approval of accounts.  There is no ability to agree fees in advance with creditors

Those involved in a liquidation process in Scotland need to understand the differences in the applicable statutory provisions and rules and ensure that the correct procedures are followed.

See also

Find out more

Insolvency (Scotland)(Company Voluntary Arrangements and Administration) Rules 2018 (Legislation)

Insolvency (Scotland)(Receivership and Winding Up) Rules 2018 (Legislation)

Insolvency Act 1986 (Legislation)

About the author

Louise Laing and Iain Penman are both senior associates in the restructuring and advisory team at Brodies LLP. Brodies LLP is a top 50 UK law firm, headquartered in Scotland.

Brodies is the largest law firm in Scotland measured by income, directory rankings and lawyer numbers. The firm delivers a full range of legal services of the highest quality to Scottish, UK and global organisations from offices in Aberdeen, Brussels, Dingwall, Edinburgh and Glasgow. For more information, visit Brodies LLP.

Publication updated: 16 December 2019