Sections 234–237 of the Insolvency Act. What directors need to know
When a company enters liquidation, directors are often surprised by the amount of information the Liquidator asks for. These requests are not optional. They come from sections 234 to 237 of the Insolvency Act 1986, which set out the legal duties on directors to provide documents, records and explanations to Liquidators. Many directors search for “Liquidator asking for information” when they first receive these requests, particularly if the volume or detail feels unexpected.
As one of our directors, Nitin Joshi, says:
“Directors are often confused about their responsibilities to a Liquidator when books and records are requested.
Nowadays it’s simpler, most companies retain their accounting records on platforms such as Quickbooks, Sage and Xero.
And to make these available is much easier, but not doing so will present a heap of problems that Directors can do without.”
This article explains what those sections mean, why the Liquidator needs the information, what directors are required to do, and what can happen if the information is not provided.
What do sections 234 to 237 cover?
Sections 234 to 237 give the Liquidator the legal powers needed to collect company property, obtain books and records and understand the company’s affairs, as follows:
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Section 234: Delivering up company property, books and records
This section allows the Liquidator to require anyone who holds company property, books or records to deliver them up. It covers physical items and digital records. The purpose is to ensure the Liquidator can identify and secure assets and understand the company’s financial position.
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Section 235: Duty to cooperate with the Liquidator
This section creates a legal duty on directors and others involved in the management of the company to cooperate with the Liquidator. It requires them to provide information, explanations and assistance that the Liquidator reasonably needs to carry out statutory duties.
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Section 236: Court orders for documents, information or examination
If information is not provided voluntarily, the Liquidator can apply to court for an order requiring a person to produce documents, provide information or attend an examination. The court decides what is reasonable based on the circumstances.
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Section 237: Enforcement of court orders
If a person does not comply with a section 236 order, the court can take enforcement action. This may include costs orders or other measures to secure compliance, including a warrant for arrest or seizure of assets.
Why must the Liquidator ask for information?
The Liquidator must understand how the company operated, what assets it had, what happened to those assets and what led to the company’s financial position. Information is needed to:
- identify and secure assets
- understand liabilities and creditor claims
- review transactions
- complete statutory reports
- investigate matters where required
- bring the liquidation to an orderly conclusion
These requests are part of the normal process. They are not an accusation of wrongdoing.
What information the Liquidator may request
The information requested will depend on the company’s circumstances. The most requested items are:
- accounts and management information
- bank statements
- invoices, contracts and payroll records
- details of assets and stock
- explanations of transactions
- information about decisions made by the directors
- access to accounting systems or cloud storage
The Liquidator will only ask for information that is reasonably required to carry out their statutory duties.
What are directors legally required to do?
Directors must:
- cooperate with the Liquidator
- provide information that is reasonably required
- deliver up books, records and company property
- attend meetings if asked
- respond within reasonable timeframes
These duties, which are part of Directors’ duties at insolvency, apply even if the director has resigned or the company has ceased trading.
What happens if a director does not cooperate?
If a director does not provide information when requested, the Liquidator may need to escalate the matter. This can include further written requests or the involvement of specialist insolvency solicitors. If the issue remains unresolved, the Liquidator can apply to court under section 236.
A court order under section 236 can require a director to:
- produce specific documents
- provide information or explanations
- attend an examination before the court or an examiner
If the director still does not comply, the court can enforce the order under section 237. Enforcement can include:
- an order requiring compliance within a set time
- a costs order against the director
- further action by the court to secure compliance
Personal cost consequences mean the director may have to pay the legal costs of the application. These costs can be significant and are separate from any company liabilities.
Non-cooperation can also have wider implications. It may delay the liquidation, increase costs and be taken into account in any investigation into the director’s conduct. Failure to deliver up books and records is a common factor in director disqualification cases, and non-cooperation can contribute to a finding of unfit conduct. These issues can lead to reputational as well as financial consequences.
How Insolvency Practitioners are required to handle information requests
Insolvency Practitioners must act reasonably and proportionately. They must:
- request only information that is reasonably required
- communicate clearly
- give directors a fair opportunity to respond
- follow the Insolvency Act and Statements of Insolvency Practice
- escalate only when necessary to fulfil statutory duties
Cooperation helps the Liquidator complete the process efficiently and protects creditors.
How we can help
If you are a director and are unsure what information you need to provide, or if you are struggling to locate records, early advice can make the process much easier, especially if the Liquidator is asking for information. Our team can explain what is required and help you understand your duties. Please contact us for a free of charge, no obligation, initial discussion.
Frequently asked questions about Sections 234-237 if the Liquidator asking for information
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Do I have to give the Liquidator the information they ask for?
Sections 234 to 237 of the Insolvency Act require directors to provide information, documents and explanations that the Liquidator reasonably needs.
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What happens if I ignore a request from the Liquidator?
The Liquidator may need to escalate the matter, which can include a court application under section 236. This can lead to cost consequences for the director.
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Can the Liquidator make me attend a meeting?
Directors can be required to attend a meeting or interview if the Liquidator reasonably needs information.
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What documents can the Liquidator ask for?
Any books, records or information relating to the company’s affairs, assets, liabilities or transactions that are reasonably required.
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Is it a criminal offence not to cooperate?
Failure to cooperate can lead to court action and may be taken into account in director conduct investigations.
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What if I genuinely do not have the records?
You should explain the position to the Liquidator as soon as possible. The Liquidator will consider the circumstances and what information can be provided instead.
