08. Insolvency law: corporate and personal. Flashcards
The objectives of administration.
1st. To rescue the company as a going concern.
2nd. To achieve a better result for creditors as a whole than a direct liquidation.
3rd. To realise assets in order to make a distribution to one or more preferential or secured creditors.
The 1st objective of administration.
To rescue the company as a going concern.
The 2nd objective of administration.
To achieve a better result for the company’s creditors as a whole, than would be likely if the company were first wound up without first going into administration.
The 3rd objective of administration.
To realise the company’s assets to make a distribution to one or more preferential or secured creditors, without unnecessarily harming the interests of the creditors as a whole.
An administrator must inform the registrar of their appointment within …
7 days
An administrator must demand ‘statements of affairs’ within …
7 days
A ‘relevant person’ must comply with an administrator’s demand for statements of affairs within …
11 days
T/F: An administrator’s appointment is terminated after one year in all circumstances.
FALSE
the court may extend it, as may creditors (once).
Creditors may only extend the term of office of an administrator …
once.
If creditors reject the proposals of an administrator …
then the court may make any order it sees fit.
T/F: An administrator requires an ordinary resolution from members or the permission of the court in order to appoint or remove directors.
FALSE
Schedule B1 of the IA gives them the power to appoint or remove directors as they see fit.
T/F: An administrator may never make a distribution to an unsecured creditor.
FALSE
It might be appropriate to pay a major supplier, for example in order to facilitate the objectives of the administration.
T/F: If a company is in administration a special resolution of members is required to pursue a winding up.
FALSE
if a company is in administration no winding up petitions can be presented.
If a company is in administration a fixed charge holder may only enforce their charge …
with the consent of the administrator or the court.
T/F: A creditor of a company in administration may not pursue their debt.
FALSE
They may pursue the debt, however charges can not be enforced nor can legal proceedings be initiated without the consent of the administrator or the court.
T/F: Only a secured or preferential creditor may present a winding up petition in respect of a company in administration.
FALSE
only the administrator may present such a petition.
If a company is in administration, the only person capable of presenting a winding up petition is …
the administrator.
A member or creditor may petition the court if they believe that the conduct of an administrator …
-demonstrates unfair prejudice
-is irregular
T/F: The employees of a company which enters administration are automatically dismissed since as preferential creditors they would have a conflict of interest should they remain in post.
FALSE
Receiver.
A person tasked with realising charged assets and using the proceeds to pay off the debt owed to the chargholder.
A person tasked with realising charged assets and using the proceeds to pay off the debt owed to the chargholder.
Receiver.
A Company Voluntary Arrangement can be proposed by …
Directors
An administrator
A liquidator
T/F: Once approved, a company voluntary arrangement becomes binding on all creditors.
FALSE
A CVA is only binding on unsecured creditors.
A CVA is only binding on … creditors.
unsecured
A CVA typically lasts for …
3 to 5 years.
T/F: A declaration of solvency in a members’ voluntary liquidation must be signed by a majority of directors.
TRUE
T/F: A declaration of solvency in a members’ voluntary liquidation must be signed by all of the company’s directors.
FALSE
it need only be signed by a majority of directors.
A declaration of solvency in a members’ voluntary liquidation must be signed by …
a majority of directors.
In a members’ voluntary winding up the liquidator is appointed via …
an ordinary resolution.
In a … voluntary winding up the liquidator is appointed by ordinary resolution.
members’
In a creditors’ voluntary winding up the liquidator is appointed via …
nomination by the directors and approval or otherwise by creditors.
In a … voluntary winding up the liquidator is appointed via nomination by the directors and approval or otherwise by creditors.
creditors’
T/F: Creditors play no part in a members’ voluntary liquidation.
TRUE
the declaration of solvency implies that they will be paid in full.
The declaration of solvency in a members’ voluntary liquidation must be dated not less than … before the resolution to wind up.
5 weeks
Notwithstanding any provision in the articles, a members’ voluntary liquidation can be initated with …
a special resolution.
In a creditors’ voluntary winding up the liquidator …
is nominated by directors and approved by creditors.
In a members’ voluntary winding up the liquidator …
is appointed by members via an ordinary resolution.
A person wishing to petition the court for a compulsory liquidation on the grounds that the company is unable to pay its debts must …
have served a written demand for a debt of at least £750 and not had it settled within 21 days.
T/F: The ‘£750 for 21 days’ test is sufficient grounds for the court to proceed with a compulsory liquidation order.
TRUE
T/F: A petition to wind up a company on ‘just and equitable’ grounds requires the petitioner to prove that the company is unable to pay its debts.
FALSE
A shareholder who wishes to petition for a winding up on ‘just and equitable’ grounds must have been registered as such …
for 6 out of the last 18 months before the presentation of the petition.
