08. Insolvency law: corporate and personal.

Question 1

The objectives of administration.

Answer 1

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.

Question 2

The 1st objective of administration.

Answer 2

To rescue the company as a going concern.

Question 3

The 2nd objective of administration.

Answer 3

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.

Question 4

The 3rd objective of administration.

Answer 4

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.

Question 5

An administrator must inform the registrar of their appointment within …

Answer 5

7 days

Question 6

An administrator must demand ‘statements of affairs’ within …

Answer 6

7 days

Question 7

A ‘relevant person’ must comply with an administrator’s demand for statements of affairs within …

Answer 7

11 days

Question 8

T/F: An administrator’s appointment is terminated after one year in all circumstances.

Answer 8

FALSE

the court may extend it, as may creditors (once).

Question 9

Creditors may only extend the term of office of an administrator …

Answer 9

once.

Question 10

If creditors reject the proposals of an administrator …

Answer 10

then the court may make any order it sees fit.

Question 11

T/F: An administrator requires an ordinary resolution from members or the permission of the court in order to appoint or remove directors.

Answer 11

FALSE

Schedule B1 of the IA gives them the power to appoint or remove directors as they see fit.

Question 12

T/F: An administrator may never make a distribution to an unsecured creditor.

Answer 12

FALSE

It might be appropriate to pay a major supplier, for example in order to facilitate the objectives of the administration.

Question 13

T/F: If a company is in administration a special resolution of members is required to pursue a winding up.

Answer 13

FALSE

if a company is in administration no winding up petitions can be presented.

Question 14

If a company is in administration a fixed charge holder may only enforce their charge …

Answer 14

with the consent of the administrator or the court.

Question 15

T/F: A creditor of a company in administration may not pursue their debt.

Answer 15

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.

Question 16

T/F: Only a secured or preferential creditor may present a winding up petition in respect of a company in administration.

Answer 16

FALSE

only the administrator may present such a petition.

Question 17

If a company is in administration, the only person capable of presenting a winding up petition is …

Answer 17

the administrator.

Question 18

A member or creditor may petition the court if they believe that the conduct of an administrator …

Answer 18

-demonstrates unfair prejudice
-is irregular

Question 19

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.

Answer 19

FALSE

Question 20

Receiver.

Answer 20

A person tasked with realising charged assets and using the proceeds to pay off the debt owed to the chargholder.

Question 21

A person tasked with realising charged assets and using the proceeds to pay off the debt owed to the chargholder.

Answer 21

Receiver.

Question 22

A Company Voluntary Arrangement can be proposed by …

Answer 22

Directors
An administrator
A liquidator

Question 23

T/F: Once approved, a company voluntary arrangement becomes binding on all creditors.

Answer 23

FALSE

A CVA is only binding on unsecured creditors.

Question 24

A CVA is only binding on … creditors.

Answer 24

unsecured

Question 25

A CVA typically lasts for …

Answer 25

3 to 5 years.

Question 26

T/F: A declaration of solvency in a members’ voluntary liquidation must be signed by a majority of directors.

Answer 26

TRUE

Question 27

T/F: A declaration of solvency in a members’ voluntary liquidation must be signed by all of the company’s directors.

Answer 27

FALSE

it need only be signed by a majority of directors.

Question 28

A declaration of solvency in a members’ voluntary liquidation must be signed by …

Answer 28

a majority of directors.

Question 29

In a members’ voluntary winding up the liquidator is appointed via …

Answer 29

an ordinary resolution.

Question 30

In a … voluntary winding up the liquidator is appointed by ordinary resolution.

Answer 30

members’

Question 31

In a creditors’ voluntary winding up the liquidator is appointed via …

Answer 31

nomination by the directors and approval or otherwise by creditors.

Question 32

In a … voluntary winding up the liquidator is appointed via nomination by the directors and approval or otherwise by creditors.

Answer 32

creditors’

Question 33

T/F: Creditors play no part in a members’ voluntary liquidation.

Answer 33

TRUE

the declaration of solvency implies that they will be paid in full.

Question 34

The declaration of solvency in a members’ voluntary liquidation must be dated not less than … before the resolution to wind up.

Answer 34

5 weeks

Question 35

Notwithstanding any provision in the articles, a members’ voluntary liquidation can be initated with …

Answer 35

a special resolution.

Question 36

In a creditors’ voluntary winding up the liquidator …

Answer 36

is nominated by directors and approved by creditors.

Question 37

In a members’ voluntary winding up the liquidator …

Answer 37

is appointed by members via an ordinary resolution.

Question 38

A person wishing to petition the court for a compulsory liquidation on the grounds that the company is unable to pay its debts must …

Answer 38

have served a written demand for a debt of at least £750 and not had it settled within 21 days.

Question 39

T/F: The ‘£750 for 21 days’ test is sufficient grounds for the court to proceed with a compulsory liquidation order.

Answer 39

TRUE

Question 40

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.

Answer 40

FALSE

Question 41

A shareholder who wishes to petition for a winding up on ‘just and equitable’ grounds must have been registered as such …

Answer 41

for 6 out of the last 18 months before the presentation of the petition.