A provisional liquidation may occur during a ‘holding period’ between when a winding-up application is made against a troubled company and when a court finally rules on the application. If a court believes the company might have to be placed in ‘formal’ liquidation, it might first place the company in provisional liquidation to preserve the company’s assets while the winding-up application is assessed. The aim of provisional liquidation is to stop the company disposing of assets in a way that might damage its creditors or shareholders. For a creditor or director or shareholder to apply for provisional liquidation they will hold very strong fears for the assets of the company being lost.
What is a provisional liquidator?
A provisional liquidator is a liquidator who is appointed by a court to manage a provisional liquidation process. Courts appoint provisional liquidators to guard against the possibility that troubled companies might dispose of assets in a way that might damage their creditors or shareholders.