Following service of a statutory demand for approximately $1.5 million in unpaid invoices, which was only partially satisfied, Aerovias del Continente Americano SA presented a winding up petition against Versilia Solutions Ltd. A number of procedural matters delayed the progress of the petition. By December 2025, however, the petitioning creditor sought the appointment of provisional liquidators, citing the company’s worsening financial position and its admitted insolvency.

At a hearing on 10 December 2025 before HHJ Klein, sitting as a Judge of the High Court, the company and its directors expressly acknowledged the petition debt. The court made a series of orders, including dismissing an outstanding administration application by consent; discharging an ex parte injunction; directing advertisement of the petition; appointing joint provisional liquidators without objection; adjourning the substantive petition; appointing joint provisional liquidators without objection; adjourning the substantive petition; and dealing with costs.

The matter later came before Lance Ashworth KC, sitting as a Deputy High Court Judge, who addressed both the winding up petition itself and an application by the joint provisional liquidators (JPLs) for an order ratifying their sale of the company’s business and assets.

The scope of a provisional liquidator’s powers

The power to appoint a provisional liquidator derives from section 135 of the Insolvency Act 1986. Importantly, section 135(5) provides that the court may limit the liquidator’s powers in the appointment order. The court therefore retains a broad discretion as to the scope and form of the powers granted.

The distinction between provisional liquidators and liquidators appointed following a winding up order was highlighted in Ashborder BV v Green Gas Power Ltd. In that case, the court emphasised that provisional liquidators are appointed on an interim basis pending determination of the petition. They are not, at that stage, tasked with fully realising company assets in the same way as a liquidator appointed after a winding up order.

In Ashborder, although the provisional liquidators had been granted a power to sell company property, the court restrained a proposed sale of causes of action to the petitioning creditor because it could have undermined the winding up process.

The sale by the joint provisional liquidators

In the present case, the JPLs instructed agents to market and sell the company’s assets. Acting on professional advice, they concluded that a particular offer represented the best opportunity to preserve value for creditors. On 19 December 2025, they completed the sale without first returning to court to confirm that the order of 10 December authorised such a transaction.

Before the Deputy High Court Judge, counsel for the JPLs accepted that, on a strict reading of the 10 December order, the sale might fall outside their express powers. Hence, they sought ratification. However, it was also argued that the sale fell within the wording of the order because it was undertaken to protect and preserve the company’s assets.

The form of order was similar to that considered in Re Union Accident Insurance Co Ltd, where the court held that protecting assets could include reducing liabilities, even where assets were not to be “distributed or parted with” without further order.

The Deputy Judge accepted that although the sale involved disposal of assets, it converted them into cash at a time when their value was at risk of decline. The assets were effectively perishable in commercial terms. Transforming them into cash preserved their value for creditors. On that basis, the sale fell within the powers to protect and secure the company’s property.

The restriction on parting with assets was qualified by wording allowing action pursuant to the functions conferred by the order. These included powers to do all things necessary or expedient for the protection of the company’s property and anything incidental to those functions. Preserving value in deteriorating circumstances was, in the judge’s view, both necessary and expedient. Ratification was therefore not strictly required.

Retrospective approval

Despite that finding, the court considered whether it could grant retrospective approval if the sale had been outside the JPLs’ powers.

The judge noted that provisional liquidators can seek directions at any stage, either under liberty to apply in the order or pursuant to section 168(3) of the Insolvency Act. In his view, the JPLs could – and should – have returned to court before completing the sale. The High Court would likely have accommodated an urgent application.

However, drawing analogies with cases concerning retrospective permission in insolvency contexts, the judge concluded there was no reason why approval could not be granted after the event. The order prohibited distribution or disposal “until further order”, and nothing required such an order to be obtained in advance.

Assuming the sale had been outside the JPLs’ powers, the judge held it should in any event be ratified. Evidence showed that asset values would likely have fallen had the sale not proceeded. The company had effectively ceased trading. The sale was the correct course to preserve value for creditors, and no prejudice was identified. The petitioning creditor did not object, and no other creditor challenged the transaction.

Declaratory relief was granted to the JPLs, and the company was subsequently wound up.

This decision highlights the importance of carefully considering the powers required when seeking the appointment of provisional liquidators in the High Court. Where a sale of business or assets may be necessary, express authority should be sought at the outset.

Insolvency litigation funding options

Litigation funding, the assignment of claims and/or ATE insurance can play a pivotal role in assisting insolvency practitioners (IPs) in meeting their obligations. Insolvency practitioners in insolvency litigation can make use of the following funding methods:

After-the-event (ATE) legal insurance – ATE insurance is generally used to protect from adverse costs risk & Security for Costs requirements. After-the-Event (ATE) legal expenses insurance is perhaps best thought as similar to a ‘swap’. For either no upfront fee or a small upfront fee, the insurer takes on all of the risk of the potential adverse costs award. The claimant has swapped their obligation to pay the defendants in the event of a loss, with the obligation to pay the insurer in the event of a win.

This ‘swap’ is generally an attractive swap as the client is likely to be in a better financial position following a loss. Also, the payment to the insurer will only be a percentage of the adverse costs rather than the whole amount.

Third party litigation funding – In some cases, third party litigation funders may be willing to provide funding for an insolvency dispute claim in exchange for a percentage of any financial settlement or damages awarded. This option can be attractive for individuals who cannot afford to pay for legal fees themselves but have a strong case. ATE insurance is often used in conjunction with this type of funding.

Assignment of litigation – Some types of disputes can be assigned to a third party, usually for an upfront payment and a share or recoveries (after costs). This model can be useful on smaller cases when the ATE and CFA model would not deliver value. But giving up control can sometimes be costly, especially on larger disputes. Working with a broker can be an effective way to understand the options and evaluate the best course of action, as well as providing the insolvency with a written record of the process undertaken.

How can Annecto Legal assist?

Disputes arising in insolvency proceedings can be costly and procedurally challenging. Annecto Legal regularly assists licensed practitioners and liquidators who are involved in the administration or liquidation of a company.

We assist a wide range of clients in finding the appropriate insolvency litigation funding, assignment options and after-the-event (ATE) insurance. We ensure you meet your professional obligations in a cost-effective manner and provide written reports to place on file.

If you are in the process of pursuing or defending an insolvency dispute and want to find out whether we can assist in helping you fulfil your obligations and secure the right deal, then contact Annecto Legal.