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SQE1 - BLP > 10. Insolvency > Flashcards

10. Insolvency Flashcards

1
Q

Personal Insolvency

What is an individual voluntary arrangement?

A

Agreement between individual debtor and all creditors where each agrees to accept less than is owed or extend period to pay.

  • Flexible arrangement
  • Generally require payment from debtor’s income or assets.
  • No determinate length of time - usual 3-5 years.
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2
Q

What companies are precluded from applying for statutory moratoriums?

A

1) Financial services firms (ie. bank and insurance companies)
2) Listed companies w/ value of more than £10 million.

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3
Q

Personal Insolvency

What is the advantage of an IVA to a debtor?

A
  • Avoids the stigma and restrictions associated with bankruptcy;
  • It can bind all unsecured creditors; and
  • A moratorium is available if an interim order is made.
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4
Q

Personal Insolvency

What is the advantage of an IVA to a creditor?

A

They may receive more money than in a bankruptcy proceeding, and more quickly

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5
Q

Who are two examples of a preferential creditor?

A
  1. Employees owed wages up to £800, from past four months
  2. HMRC in respect of VAT, PAYE, and National Insurance
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6
Q

Personal Insolvency

What is bankruptcy?

A

A judicial process in which assets of a bankrupt debtor are passed to a third party, the trustee in bankruptcy, who liquidates the assets and uses the proceeds to pay off as many debts as possible, in a strict order set out by legislation

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7
Q

Personal Insolvency

What period after a bankruptcy application is a debtor deemed discharged from the debts?

A

One year

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8
Q

Personal Insolvency

What are the three ways a debtor can be placed into bankruptcy?

A
  1. Debtor’s petition - where it declares itself bankrupt.
    * unable to pay its debts
    * Statement of affairs - evidencing this.
  2. Creditor’s petition -
    * unable to pay its debts - evidenced (i) by statutory demand if an unsecured creditor (£5000 or more) that has not been satisfied within 3 weeks of service; or (ii) judgement debtor.
    * Statement of affairs - evidencing this.
  3. Supervisor or creditor can apply if debtor has breached IVA
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9
Q

Pesonal Insolvency

Who is the official receiver?

A

A civil servant who will act as the trustee in bankruptcy unless creditors seek to nominate their own.

AUTOMATIC appointment

Note - if there are few assets in the bankruptcy estate, it may be difficult to persuade anyone else to act as Trustee as there will be insufficient funds to pay fees and expenses.

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10
Q

Personal Insolvency

What assets is a bankrupt able to retain?

A

Assets needed for day-to-day living, including furniture, and any tools required for their job

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11
Q

Personal Insolvency

What is an income payments order, and what is the maximum length of one?

A

Although a bankrupt is entitled to retain any salary they make, if the salary exceeds the amount needed for the reasonable needs of them and their family, an income payments order can be made, for a maximum of three years

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12
Q

Personal Insolvency

What three things is a debtor in a bankruptcy restricted from doing?

A
  1. Apply for credit over £500 without disclosing bankruptcy.
  2. Act as company director or partner
  3. Trade under another name without disclosing the bankruptcy
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13
Q

Personal Insolvency

What is the order of priority in a bankruptcy distribution?

A
  1. Costs of the bankruptcy
  2. Preferential debts
  3. Secured creditors
  4. Unsecured creditors
  5. Postponed creditors
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14
Q

Personal Insolvency

Who is a postponed creditor?

A

Spouse or civil partner

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15
Q

Personal Insolvency

What occurs if a partner in a partnership at will is made bankrupt?

A

Partnership is dissolved and the trustee receives any money due to the insolvent partner

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16
Q

Personal Insolvency

What occurs if a partner in a partnership not at will is made bankrupt, and what is required for this?

A

If the partnership agreement provides that bankruptcy of a partner will not terminate the partnership, the remaining partners will usually purchase the bankrupt partner’s interest from the trustee

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17
Q

What is fixed asset receivership?

A

Where secured creditor appoints a fixed charge receivers are appointed pursuant to the terms of the relevant security document to enforce the security, manage and sell the secured assets.
* owe their duties primarily and exclusively to the appointor.
* cannot be appointed while a pre-insolvency moratorium subsists or if the company is in administration.

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18
Q

What percentage of creditors must agree to a Restructuring plan and does it bind those who do not vote for it?

A

75% in value of the debts owe in each respective class, and binds all creditors if passed.
- court has the power to force plan unto an unwilling class via cross-class clampdown.

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19
Q

What two conditions are needed for the court to order a cross-class clampdown in the context of adopting a Restructing Plan?

A

1) Satisfied none of the dissenting class would be worse off if the arrangement was approved
2) creditors representing 75% in value of debts owed in each class = receive £££ or genuine economic interest.

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20
Q

What three things are prohibited when a company seeks a moratorium?

A
  1. Creditors cannot take action to enforce their rights or launch proceedings
  2. Landlord may not forfeit lease of company premises
  3. Floating charge holder may not crystallise charge
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21
Q

Corporate Insolvency

What is the exception to the payment holiday a company enjoys during a moratorium?

A

Wages and other payments to employees, including holiday pay

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22
Q

Corporate Insolvency

What are the ways an administrator can be appointed?

A
  1. Court appointment - on application of directors, a creditor, supervisor of CV, the company, or a liquidator.
    * where application is made, interim moratorium comes into effect until the adminsitration order is made/applciation is dismissed.
    * uncommon procedure, generally out-of court
  2. Out-of-court - directors/company or holder of a qualifying floating charge file certain documents in court
    * file a NOI at court.
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23
Q

Corporate Insolvency

If the court appointment is used for an administrator, what two things must the court be satisfied of?

A
  1. Company unable to pay debts
  2. Administrator likely to achieve better result for the creditors than liquidation
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24
Q

Corporate Insolvency

If the company or directors appoint the administrator, who must they notify and what can they do?

A

They must notify any qualifying charge holders, who can agree or appoint an alternative administrator.
* two different filings of a NOI - gives QFC chance to appoint alternative choice after first NOI.

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25
Q

Corporate Insolvency

What is a qualifying floating charge?

A

Floating charge over the whole or substantially whole of the company’s assets
AND
Document creating it or enables it to appoint an administrator or receiver.

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26
Q

Corporate Insolvency

What are four powers of an administrator?

A
  1. Take control of and sell company assets
  2. Bring and defend legal proceedings on behalf of the company (i.e. against directors for fraudulent/wronglful trading)
  3. Carry out the company’s business
  4. Remove and appount directors
  5. Dispute of property subjective to floating or fixed charged.
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27
Q

Corporate Insolvency

Generally, what proportion of the value of the creditors must agree to an administrator’s proposals?

A

Majority in value of creditors present and voting at the meeting
- subject to special rule on minority votes (not pass if unconnected creds with 50% in value of debts owed vote against)

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28
Q

Corporate Insolvency

What are the benefits of administration?

A

Company has the benefit of a full moratorium.
1. No order or resolution to wind up the company can be made or passed;
2. No administrative receiver of the company can be appointed;
3. No steps can be taken to enforce any security over the company’s property or to repossess goods subject to security, hire purchase and retention of title;
4 .No legal proceedings, execution or other process can be commenced or continued against the company or its property, and
5. A landlord cannot forfeit a lease of the company’s premises.

However, during this time, all business documents and the company’s website must state that the company is in administration.

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29
Q

Corporate Insolvency

What is a Company Voluntary Arrangement?

A

Basically an IVA for companies, approved if:

1) At least 75% in value (i.e, value of debts owed) of those voting on the CVA proposal (excluding secured creditors) vote in favour;
* if the above majority is obtained, the decision of will be invalid if those voting against the CVA proposal include more than half of the total value of creditors unconnected to the company; and

2) Simple majority of shareholders/members vote in favour.

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30
Q

Corporate Insolvency

What are the advantages of CVA for companies?

A
  • Directors remain in control of the company,
  • Company can continue to trade subject to the terms of the CVA proposal with the hope of the company surviving as a going concern.

Trade creditors tend to support CVAs as they are likely to recover more than if the company goes into administration or liquidation.

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31
Q

Corporate Insolvency

What is a Members’ voluntary winding up (MVL)?

A

Where members control liquidation and company is solvent.
* directors make a sworn declaration of solvency - of the opinion that the company will be able to repay its debts in full in next 12 months.
* declaration must include a statement of the company’s assets and liabilities as of the latest practicable date before making the declaration.

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32
Q

What is a Creditors’ voluntary winding up (CVL)?

A

Form of insolvent liquidation commenced by resolution of the shareholders, but under the effective control of the creditors who can choose the liquidator.
* shareholders pass a special resolution to place the company into a CVL and an ordinary resolution to appoint a nominated liquidator.
* give notice to company’s creditors to either approve the nominated liquidator or put forward their own choice of liquidator.

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33
Q

What is the main reason the directors would commence a CVL?

A

The directors are advised the company is insolvent, and do not wish to be personally liable for the debts of the company through fraudulent or wrongful trading if they continue to trade

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34
Q

Corporate Insolvency

What are the two steps required within the company to begin a CVL?

A
  1. Directors pass a board a resolution stating the company is insolvent and should be placed into liquidation
  2. Members pass special resolution to start the liquidation
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35
Q

What is the distinction between the timelimits for a TUV in the corporate versus the personal insolvency context?

A

corporate insolvency
* relevant time - up to 2 years from onset of insolvency.
* insolvency must be proven if with an unconnected party.
* insolvency is presumed with a connected person.
* defence is available

personal insolvency
* relevant time is up to 5 years.
* insolvency is presumed in ALL cases if occured up to 2 years before onset of insolvency.
* no need to prove insolvency if with a connected person at all.

36
Q

What must any creditor be able to show to petition the court to wind up a company, and what will cause the court to dismiss the petition if shown by the company?

A

Creditor must show company is unable to pay debts, and court will dismiss if company can show it may recover financially or that the debt upon which the petition is based is disputed

37
Q

What is the order of priority in a liquidation of a company?

A
  1. Liquidator’s fees and expenses of preserving and realising assets subject to fixed charges.
  2. Amount due to fixed charge creditor out of the proceeds of selling assets subject to the fixed charge.
  3. Liquidator’s other remuneration, costs and expenses.
  4. Preferential creditors (the first tier and then the secondary tier).
  5. Creation of the prescribed part fund (if available) for unsecured creditors.
  6. Amount due to creditors with floating charges.
  7. Unsecured/trade creditors (including payment of the prescribed part).
  8. Interest owed to unsecured creditors.
  9. Shareholders.
38
Q

Personal Insolvency

What conditions must be satisfied when determining whether a preferential transaction has taken place?

A

Transaction putting creditior in a better positiion than they otherwise would have been.

Relevant time
* Unconnected - within 6 months from date of bankruptcy petition;
* Connected - within 2 years from date of bankruptcy petition if to an associate.

Proving insolvency
* Show individual was insolvent at the time of the preference or became insolvent as a result of it.
* No presumption is available.

Desire to prefer
* Show individual was influenced by the desire to prefer the creditor.
* Rebuttable presumption (for the associate to rebut) where transaction is with an associate

39
Q

What is the status of a preference?

A

Voidable by the court

40
Q

Corporate Solvency

What are the three conditions to satisfy to successfully defend a TUV claim, and when can the defence be raised?

A

Defence is only available in the corporate solvency context.

Transaction entered into:
1. In good faith
2. For the purpose of carrying on the business
3. With reasonable grounds to believe it would benefit the company

41
Q

When does fraudulent trading arise?

A

When a director (or other person who knowingly participates) carries on business of the company, knowing it is insolvent, with the intent to defraud creditors

  • actual dishonesty (subjective basis) must be shown.
  • can also bring claim again i.e. banks by virtue of employee’s knowledge - term ‘any person’ - widely interpreted.
  • civil liability + criminal offence + likely face disqualification.
  • claim can be brought by a liquidator or adminsitrator.
42
Q

When does wrongful trading arise?

A

When at some time before a company became insolvent:
* Directors knew or ought reasonably to have known that was no prospect the company would avoid insolvency (reasonably diligent person test); and
* Failed to take adequate steps to minimise losses for creditors

Can be brought by liquidator/administrator
* also assign claim to 3rd parties as a way to raise funds for estate while avoiding risk of litigation.

Note - company goes insolvent once its assets are insufficent for the payment of its debts.

43
Q

How does the reasonably diligent person test apply in determining whether a director is liable for wrongful trading?

A

Consider whether reasonably diligent person in having:
* objective- general knowledge, skill and experience reasonably expected of a person carrying out the same functions as are carried out by the director in question (an objective test); and
* subjective - actual knowledge, skill and experience of that particular director (a subjective test).

Either when concluding that:
1) no resonavble prospect of avoiding insolvency; or
2) Every step defence

Court then applies the higher of the two standards.

44
Q

In a wrongful trading situation, when does a director’s duty shift and to whom does it shift?

A

The duty shifts from what is best for the shareholders to what is best for the creditors, once the director knows or ought reasonably to know insolvency is unavoidable

45
Q

What can a director show in defence to a wrongful trading claim?

A

Every step defence
Took every step with a view to minimising the potential loss to the company’s creditors.

E.g.
* voicing concerns at regular board meetings;
* seeking independent financial and legal advice;
* ensuring adequate, up-to-date financial information is available;
* suggesting reductions in overheads/liabilities;
* Taking advice on steps such as initiating appropriate insolvency procedures or negotiating with creditors to restructure its liabilities.

46
Q

What is a transaction at an undervalue?

A

When property that would otherwise have formed part of the bankruptcy estate is gifted or sold for significantly less than market value within two years of a company’s insolvency or five years of an individual’s bankruptcy

47
Q

What companies cannot avail of a moratorium?

A

Companies subject to insolvency proceedings currently or within the last 12 months

48
Q

What are the four ways a company can be said to be insolvent?

A

1) fails cash flow test - unable to pay its debts as they fall due.

2) fails balance sheet test - liabilities exceed its assets.

3) unable to comply for statutory demand of repayment over £750.

4) failure to pay creditor to satisfy court order enforcing repayment of debt.

49
Q

Purpose of a pre-solvency moratorium period,

A

allows company to buy itself time by preventing creditors from exercising their rights/remedies during this period (w/out directors approval).

50
Q

Procedure for grant of a pre-insolvency moratorium

A

company applies to court, and must file:
- statement that company is or likely to become unable to meet its debts.
- statement from insolvency practitioner that in their view, such period will result in the rescue of the company.

51
Q

How long does a pre-solvency moratorium under the CIGA 2020 last?

A

20 business days

It can be extended for a further 20 business days without any consent, or for longer with consent of the pre-moratorium creditors or the court.

Maximum 1 years extension can be agreed with creditors.

52
Q

What debts must a company continue to repay and are not “frozen” by moratorium period?

A

debts due during/after moratorium period, including:
- Monitor’s expenses
- $$$ due on goods/services ordered and used during moratorium period.
- rent incurred during moratorium.
- wages/redundancy payments
- loans under contract with financial services (ie. bank loan, and guarantee agreements)

  • to survive = company must effectively still be cash flow solvent.
53
Q

What relevant action can an unsecured creditor take following the approval of a CVA?

A

Lodge an unfair prejudice claim within 28 days of its approval.

  • prove either that CVA treats one creditor unfairly compared to others or that there exists a material irregularity in manner which company’s procedure was followed.
54
Q

What remedies are available where a wrongful trading claim is successful?

A
  • Court can order that director to make such contribution to the assets of the company as the court thinks fit.
  • Compensatory, not penal in nature.
  • Order may be made on a joint and several basis, or apportion liability based on culpability.
  • Disqualification order

Note - relief is available for directors under s.1157 CA which gives courts statutory power to excuse directors for negligence, breach of duty/trust where reasonable to do so.

55
Q

Where a company has several QFCH, which holder has priority in appointing their choice of administrator, and how must they proceed in doing so?

A

ordinary priority rules - QFCH with earliest date of creation.
- any QFCH with priority must be given 2 business days to respond to a notice of appointment. Can only proceed with their consent.

56
Q

How long does an admistrator have to complete admistration?

A

12 months, during which company is subject to a full moratorium.

57
Q

How is the standard procedure for a company when applying for a moratorium period where a creditor has already filed a winding-up petition against the company?

A

The company must make an application to court, rather than simply file the relevant documents to obtain a moratorium.

58
Q

How is creditor voluntary liquidation more advantageous for a company than applying for compulsory winding-up?

A

Avoids costs and time of presenting a a petition to a court for compulsory winding up.

59
Q

Personal Insolvency

What is the status of any payment made by an individual following the presentation of a bankruptcy petition against them?

A

If they are adjudicated bankrupt by the court, the payment is automatically deemed void unless the court approves it.

60
Q

Personal Insolvency

What effect does an interim order have in the context of an IVA?

A

If granted, debtor benefits from a 14 day moratorium period.
* Nominee generally applies on debtor’s behalf, and during this moratorium period gives opportunity for creditors to agree to the IVA.
* No bankruptcy petition may be presented or proceeded with.
* No landlord may exercise their forfeiture rights
* No other proceedings or legal process can be commenced against debtor without court’s permission.

61
Q

Personal Insolvency

What is a Bankruptcy Restrictions Order?

A

Effective for period of 2-15 years.
It is imposed following an application by the Secretary of State if it believes bankrupt acted dishonestly before or after bankruptcy order.

62
Q

Personal Insolvency

What alternatives to bankruptcy are available to an individual?

A

1) Individual voluntary arrangement
2) Debt Relief Order
3) Debt Respite Scheme

63
Q

Corporate Insolvency

What are the conditions to set aside a preferential transaction for a company?

A

1) Put creditor in a better position than they otherwise would have been in the event of insolvency.

2) Time limit to challenge
* within last 6 months;or
* 2 years if with a connected party or associate.

3) Desire to prefer (Re MC Bacon)
* Presumed if with a connected party.
* Subjectively tested.
* Includes mixed motives - need not need not be the ‘dominant’ intention.
* Presence of genuine commercial pressure can negate the desire to prefe

64
Q

Corporate Insolvency

What sanction is available for a preferential transaction and TUV?

A

An order to restore the position as if the company had not given the preference. Including return of any property transferred or payment of proceeds of sale forming part of the transaction.

65
Q

Corporate Insolvency

For a company, what conditions must be satisfied for a TUV ?

A

Transactions at an undervalue
1) Occured within 2 years prior to onset of insolvency;
2) Company was insolvent at time / as a result
* presumed with connected persons

66
Q

What conditions must be made out to render a new floating charges invalid against other creditors?

A

Automatically void (cf. voidable) where:
Floating charge created for no new consideration
* within 12 months prior to onset of insolvency
* Within 2 years if connected person
* Company insolvent at time / as a result

Note - overdraft will be treated as a new advance, and thus protected from being invalidated.

67
Q

What type of court order is generally made for preferential and undervalue transactions?

A

restorative order
- note possibility of bona fide purchaser (precludes proprietary remedy)

68
Q

What is the distinction between compulsory and voluntary liquidation procedures?

A

Voluntary liquidation is company led, whereas compulsory liquidation is initiated by filing petition at the court. In voluntary liquidation, members pass a special resolution to wind up company.

69
Q

Corporate Insolvency

What are the consequences of making a declaration of solvency for directors in MVL?

A

If find that directors had no reasonable grounds for their opinion, they may be subject to a fine or imprisonment.
* If the debts are not paid in full within the specified period, presumption that the director did not have reasonable grounds for his opinion applies.

70
Q

What is the procedure for creditor’s voluntary liquidation?

A

1) SR passed by shareholders to wind-up company
2) OR to appoint liquidator
3) Notify company’s creditors within 14 days of passing SR company’s creditors if they object/approve of choice of liquidator.

71
Q

Personal Insolvency

What is the procedure to set up an IVA?

A
  1. Debtor drafts a proposal for compromise of their liabilities and a statement of their affairs with the assistance of an insolvency practitioner (Nominee).
  2. Nominee bubmits a report to the court stating their opinion on whether the debtor’s proposal has a reasonable prospect being approved by creditors.
  3. A debtor can apply for an interim order in the meantime (aka moratorium period).
  4. Vote is covened and approved by creditors holding at least 75% (by value) of the total debt owed to the creditors present/voting on the proposal.
    * Even where approval is given, it will not be effective if more than half the of the total value of creditors are connected to the debtor.
72
Q

Personal Insolvency

What is the effect of approval of an IVA?

A
  • If approved, the IVA binds the debtor and all of their unsecured creditors.
  • Nominee becomes the Supervisor of the IVA and is responsible for its implementation.
  • The Supervisor can apply to court for directions and must report to the court periodically.
  • If the debtor fails to comply with the terms of the IVA, the Supervisor can petition for the debtor’s bankruptcy.
  • At the end of the IVA, if the debtor has complied with the terms of the IVA, the creditors will have to write off any balance of their pre-IVA debts against the debtor.
73
Q

What restrictions apply when a bankruptcy order is in place?

A

Prohibited from the following:
* Acting as a director/being involved in the management of a company.
* Obtaining credit of over £500 without disclosing the bankruptcy, giving gifts and practising in certain professions.
* Deprived of ownership of their property except for their reasonable domestic needs.

74
Q

Personal Insolvency

What powers does the trustee have over the bankrupt’s estate?

A

The bankrupt’s estate vests in the Trustee immediately.
* To sell and distribute money according to statutory order.
* Disclaim onerous property or contracts

75
Q

What procedure must a creditor in a bankruptcy follow to recover any debt owed?

A

1) Need to prove their caim to the Trustee by providing evidence in support of their claim.
2) Trustee decides amount of dividend they are entitled to and give notice when asset is sold/proceeds received.

76
Q

What duty does a bankrupt owe and who does it owe to?

A

A bankrupt owes a duty to the Trustee to provide it with information and assistance to enable it to carry out its functions.

  • Criminal offence for the bankrupt to fail to comply.
  • Risk of having their automatic discharge suspended
77
Q

Personal Insolvency

What is a BRO?

A

Application made by Sos/Official Receiver where bankrupt’s conduct calls for it.
* Bad conduct - including failure to keep records, entering into preferences or transactions at an undervalue, fraud and incurring a debt without reasonable expectation of being able to pay it.
* Application to be made within a year of the start of the bankruptcy.
* Operate for period of between two and 15 years (elongates restrictions a bankrupt is generally subject to).
* Breach of BRO is a criminal offence

78
Q

Personal Insolvency

What requirements must be met for a transaction defrauding creditors?

A
  • Must be transaction for an undervalue
  • Need intention to defraud creditors or to put assets beyond their reach
  • No need for individual to be insolvent
  • No relevant time to consider
79
Q

When is a Restructuring Plan appropriate?

A

Consists of a court-sanctioned compromise between a company and its creditors and shareholders to restructure the company’s debts.
* a hybrid between A Plan is a hybrid of a CVA and a ‘scheme of arrangement’ under CA 2006.
* only be used by companies which have or are likely to encounter financial difficulty.

80
Q

What are the advantages of a Restructuring Plan?

A

The court can:

1) Exclude creditors and shareholders from voting even if they are affected by the Plan if they have no genuine economic interest in the company;

2) Sanction a plan which brings about a “cross-class cram down” if it is just and equitable to do so even if one or more classes do not vote to approve the Plan.

E.g cramdown of shareholders - i.e. force shareholders to accept a debt-for-equity swap.
* creditors can convert their debt into equity.
* altering rights and claims of secured creditors and shareholders is something a CVA cannot do - allows greater flexibility on who/how to bind.

81
Q

What are the statutory objectives of insolvency?

The 3 R’s

A

First - Rescue the company as a going concern; or

if that is not reasonably achievable

Second - to achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up…, or if that is not reasonably achievable; or

if that is not reasonably achievable

Third - realise the company’s property to make a distribution to one or more secure or preferential creditors.

82
Q

What are the alternatives to bankruptcy?

A
  • IVA
  • Apply under Debt Respite Scheme (‘Breathing Space’)
  • Apply for Debt Relief Order
  • Negotiate with creditors
83
Q

Personal insolvency

What is a Debt Respite Scheme?

A

Offers moratorium period of up to 60 days.
* alternative for mental health crisis - lasts the length of crisis + 30 days.
* Applied for with a debt advice provider.
* Not available if subject to DRS in past year or currently subject to any informal/formal arrangement.

84
Q

Personal insolvency

What is a Debt Relief Order?

A

Alternative for individuals with low assets and liabilities.
* Protected from enforcement action for 12 months.
* Subject to same restrictions as a bankrupt.
* Only available if - unsecured liabilities are less than £20,000; total gross assets are less than £1,000; disposal income after living expenses is no more than £50, not subejct to DRO in past 6 years; not subject to another insolvency procedure.

85
Q

What must be shown for TUV?

A

An undervalue is where the company/individual makes a
gift to the other person, or enters into a transaction and receives consideration which is
significantly lower in value than the consideration provided by the company/individual.
* merely granting security does not deplete assets so does not amount to a TUV (Re MC Bacon)

86
Q

What is ring-fencing and when is it relevant?

A

Prescribe pot is set aside from floating charge assets to benefit unsecured creditors. Reduces funds available to floating charge holdiers.

Amount to set aside is:
* 50% of the first £10,000 of money received from the property which is subject to floating
charges; and
* 20% of the remaining money

SQE1 - BLP (10 decks)

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