Disclosure of s.176 Companies Act 1931 Reports

s.176 Companies Act 1931 imposes similar reporting duties on a Manx liquidator as are imposed on the official receiver in England per s. 132 Insolvency Act 1986 (noting that the Manx provision also refers to reports by official receivers but no such office was created within the jurisdiction so the function is usually conferred in liquidators at the time the winding up order is made).

The Manx provision is more extensive than the English provision and subsection 1 reads:

In a case where a winding-up order is made, the official receiver shall, as soon as practicable after receipt of the statement to be submitted under the last foregoing section, or, in a case where the court orders that no statement shall be submitted, as soon as practicable after the date of the order, submit a preliminary report to the court —

(a) as to the amount of capital issued, subscribed, and paid up, and the estimated amount of assets and liabilities; and

(b) if the company has failed, as to the causes of the failure; and

(c) whether in his opinion further inquiry is desirable as to any matter relating to the promotion, formation, or failure of the company, or the conduct of the business thereof.

Subsection 2 of the Manx provision provides a mechanism by which a liquidator may bring to the court’s attention issues which he believes warrant further investigations. It reads:

The official receiver may also, if he thinks fit, make a further report, or further reports, stating the manner in which the company was formed and whether in his opinion any fraud has been committed by any person in its promotion or formation, or by any director or other officer of the company in relation to the company since the formation thereof, and any other matters which in his opinion it is desirable to bring to the notice of the court.

What is not clear from the legislative provisions is the extent to which a liquidator can or should take steps to disclose the content of the s.176 report to third party agencies, for example regulators.

In the English case of R v Brady [2004] EWCA Crim 1763 the Official Receiver disclosed statements taken in connection with preparing a s.132 IA 1986 report and the court held that when these were disclosed to the Inland Revenue this was perfectly legitimate. The headnote to the Brady case reads:

“the purpose of the statutory investigatory powers under the Insolvency Act 1986 included the identification of potential criminal or other misconduct and the taking of appropriate steps by criminal prosecution and/or disqualification; that, therefore, once the Department of Trade and Industry or official receiver was satisfied that section 235 material was required by another prosecuting authority for the purpose of investigating crime, it was free to disclose it without an order of the court or notice to the person who provided it; and that, accordingly, the disclosure of the section 235 material to the revenue had been lawful, there had been no abuse of power and the convictions were not unsafe”

The statutory provision therefore seems to support disclosing such a report to, for example, prosecuting authorities such as the police or perhaps government departments responsible for revenue collection. The ground may be more uncertain for disclosure to a professional regulator or trade body in which case the safest course for all other disclosures would be with the approval of the court (application pursuant to section 185(3) CA 1931).

Liquidators should bear in mind that much of the material in a report will be derived from company documents in respect of which no external obligation of confidentiality is likely to be owed. The report itself is a document prepared and produced by a liquidator and their advisers. Any confidentiality concerns connected with it must arise from the documents referred to and information cited in it.

Another option would be for external organisations to seek the direction of the Court as to whether a report can be disclosed. This would likely be more convenient than having a third party make a disclosure application for example. If a body has a statutory right to require information to be provided and relies on that to make a request, then it is likely that disclosure can be given as statutory disclosure obligations override general confidentiality and provide a public interest basis for giving disclosure of the information demanded/requested under that statutory authority.

Damian Molyneux is a director of M&P Legal specialising in, amongst other things, liquidations. He can be contacted on dpm@mplegal.im This article does not constitute legal advice, specific advice should be sought for individual circumstances. Damian acknowledges (with thanks) the assistance of James Saunders of New Square Chambers.

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