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BLP > 9.1 Insolvency Procedures > Flashcards

9.1 Insolvency Procedures Flashcards

1
Q

What insolvency procedure protects goodwill

A

Administration

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2
Q

What is Ds statutory declaration for MVL

A

C will repay debts within X period

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3
Q

How many ways to prove insolvency for compulsory liquidation

A

Four

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4
Q

Sixth stage in IP

A

Floating charge creditors

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5
Q

895 - 901 CA on what

A

Scheme of arrangement

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6
Q

When can fixed charge holder appoint receiver

A

In circumstances set out in security doc

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7
Q

What does a company voluntary arrangement do

A

Imposes fixed timetable to repay, or if rescue impossible, to achieve better asset realisation on winding up

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8
Q

Where are the statutory grounds for compulsory liquidation

A

122 IA

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9
Q

What do all kinds of liquidation lead to

A

Dissolution

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10
Q

What must the BS show for MVL

A

That assets exceed liabilities

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11
Q

What must Ds confirm in a report for CVA

A

It has RP of being (i) approved by 75% of all creditors, representing more than 50% unconnected and (ii) successfully implemented

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12
Q

What is an ‘unconnected creditor’ for the purposes of a CVA

A

Not D/CP/significant creditor

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13
Q

What is the prescribed part

A

A percentage taken out for unsecured creditors

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14
Q

What is a FCR the receiver of

A

Only of property charged

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15
Q

When are there disclosure requirements for insolvency and what are they

A

If goes into A, must publicise and put on stationery

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16
Q

Negative of pre-pack A

A

Poor recovery for creditors as buyer will cherry pick

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17
Q

Two kinds of receivers

A

Fixed charge and administrative

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18
Q

Member resolutions required for MVL

A

SR for MV + OR to appoint L

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19
Q

What kind of liquidation is out of court

A

Members and creditors voluntary

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20
Q

What procedure applies to scheme of arrangement - how is the arrangement put into place

A

Sanctioned by the court

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21
Q

Which is not an officer of the court - A or L

A

L

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22
Q

Third in insolvency priority

A

Other costs of L

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23
Q

When does the appointment of A terminate automatically

A

After 1 year

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24
Q

1 - 7 IA on what

A

Company voluntary arrangement

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25
Q

When will a company voluntary arrangement be used

A

If company trying to trade out of difficulty

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26
Q

What is the procedure for compulsory liquidation

A

Petition to court on statutory ground

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27
Q

What is taken off the cash distributed to FC creditors in insolvency

A

Costs of preserving/realising fixed charge assets

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28
Q

Procedure for MVL

A

Ds statutory declaration + Ms paid in full

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29
Q

What is the only forma insolvency arrangement available if company does not have 100% agreement to e.g. extend maturity date on loans

A

Scheme of arrangement

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30
Q

Example of preferential debts

A

Wages owed to employees

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31
Q

What kind of liquidation requires court

A

Compulsory

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32
Q

When can QFCH appoint A

A

Schedule B1 para 14 IA and if charging doc states so applies

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33
Q

What are the duties of liquidator

A

De facto agent of C

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34
Q

Two usual grounds of compulsory liquidation

A

Insolvency or just and equitable

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35
Q

What is the benefit of a CVA over an SoA

A

No court involvement, so cheaper

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36
Q

Why might a members voluntary liquidation be used

A

Commercial/tax reasons

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37
Q

Is there a moratorium whilst in AR

A

No

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38
Q

What formal arrangement requires court sanction

A

Scheme of arrangement

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39
Q

Why must Ds be able to recognise insolvency situation

A

They can be personally liable (under IA), BoD (172(3) CA) and be disqualified (CDDA)

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40
Q

How do fixed and floating charge creditors rank

A

In order of creation, if properly registered

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41
Q

What is a consensual agreement

A

Adjust terms of debt to be beneficial to debtor

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42
Q

Who is at the very bottom in the list of priority in insolvency of company

A

Ms

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43
Q

What is liquidation

A

Sale of assets piecemeal

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44
Q

Where are the powers of AR

A

In debenture + Schedule 1 IA

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45
Q

What is a QFCH

A

Qualifying floating charge - can appoint A

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46
Q

What powers does FCR have

A

As in security doc + LPA ‘25

47
Q

Two ways to appoint an administrator

A

Out of court or by court order

48
Q

What is the period in which a creditor can challenge a CVA

A

28 days

49
Q

Why is liquidation normally after A

A

No moratorium in liquidation + L limited powers to keep trading

50
Q

What is a moratorium

A

Creditors cannot exercise rights/remedies

51
Q

Three people who can appoint A out of court

A

Ds, Ms and QFCH

52
Q

How do you document a consensual agreement

A

In restructuring agreement w/ contractual force

53
Q

Particular power of A in Schedule 1 IA

A

Power to carry on business

54
Q

What is a pre-pack administration

A

Business sale organised prior to A formally being appointed

55
Q

When can A pay dividend to unsecured creditors

A

Court permission, or if paying to secured - comes out of prescribed part

56
Q

Two formal insolvency arrangements under statute

A

Scheme of arrangement and company voluntary arrangement

57
Q

Where are the powers of A

A

Schedule 1 IA ‘86

58
Q

Is CVA under CA or IA

A

IA

59
Q

First to consider in insolvency priority

A

Costs of preserving/realising fixed charge assets

60
Q

What insolvency procedure imposes a moratorium

A

Administration

61
Q

What is the order of priority in insolvency subject to

A

Subordination agreements and proper registration

62
Q

When can an AR be appointed

A

QFCH created before 15/09/2003 + terms confer right

63
Q

Why is CVA alone unlikely to guarantee success

A

It is usually part of wider restructuring - it is insufficient in itself, as it just imposes a new timetable to repay the same debts

64
Q

When might an interim moratorium be used

A

If notice of intention to appoint A filed at court

65
Q

Does a moratorium restrict the rights of QFCH to appoint A

A

No

66
Q

Why does M’s nomination of L for CVL not really count

A

Ds must ask creditors within 14 days to approve/nominate their own - this takes precedence

67
Q

What formal arrangement under statute binds all creditors

A

Scheme of arrangement

68
Q

What are the powers of liquidator

A

Extensive, including claw back provisions and distributing assets

69
Q

Three people who can appoint A by court order

A

C, D an M

70
Q

What percentage of creditors have to agree to company voluntary arrangement (NV)

A

75% of all, and more than 50% unconnected

71
Q

Three kinds of liquidation

A

Compulsory, voluntary members, and voluntary creditors

72
Q

What M resolution to approve CVA

A

OR

73
Q

What creditors need to agree for scheme of arrangement

A

3/4 in value and majority in number

74
Q

How can appointment of A be extended

A

By creditors for up to 1 year, and court for any further time

75
Q

Member resolutions required for CVL

A

SR for CVL + OR to nominate L

76
Q

Where are the four ways to prove insolvency for compulsory liquidation

A

123

77
Q

Why is recovery less in liquidation than for A

A

Sale of assets piecemeal rather than sale as going concern

78
Q

What is the final stage in IP

A

Shareholders

79
Q

Why is a CVA cheaper than SoA

A

No court involvement

80
Q

What are the duties of A

A

Agent of C and officer of court

81
Q

Who usually applies for compulsory liquidation and why

A

Unsecured, as QFCH can appoint A + FC can enforce

82
Q

Who usually appoints an administrator out of court

A

QFCH or Ds

83
Q

Is A still officer of court even if appointed out of court

A

Yes

84
Q

Is scheme of arrangement under CA or IA

A

CA

85
Q

What is a benefit of pre=pack A

A

Preserves goodwill

86
Q

What happens if security is insufficient for secured creditors debt owed - can they take out of PPF?

A

Cannot take out of prescribed part fund

87
Q

What key power does an LPA receiver not have

A

Power of sale

88
Q

Fourth in IP

A

Preferential debts

89
Q

Second in insolvency priority

A

Fixed charge creditors

90
Q

Relevant date for QFCH to appoint AR

A

Before 15/09/2003

91
Q

Seventh stage in IP

A

Unsecured creditors (ADD PRESCRIBED PART BACK IN)

92
Q

Why is an AR preferable

A

Only owes duty to the appointer

93
Q

What is the downside of CVA over SoA

A

CVA only binds unsecured, unless secured are unanimous in consenting

94
Q

How do you work out how many p/£1 owed unsecured creditors get

A

Left/owed x 100

95
Q

Who has the effective control of CVL

A

Creditors

96
Q

What is the downside of a consensual agreement

A

Unlikely to reach agreement w/ all creditors

97
Q

How are creditors paid in liquidation

A

Proportionate to claim

98
Q

Who can pay dividend - A/L, usually?

A

L, not A

99
Q

What is the stage after unsecured creditors in IP

A

Interest on unsecured debts

100
Q

What is the first step in CVA

A

Ds formulate written proposal + nominate LIP as ‘supervisor’

101
Q

When does MVL convert into CVL

A

If company becomes unable to pay debts within period in D’s statutory declaration

102
Q

What formal arrangement do Ms have to approve and how

A

CVA - by OR

103
Q

What happens if no creditor challenges CVA

A

Binding and LIP will implement

104
Q

Why might company need to go into administration before company voluntary arrangement

A

To stop creditors taking hostile action between CVA notice + procedure

105
Q

What are the 3 objectives to administration

A

Rescue going concern, achieve better result for Cs, and realise property to distribute

106
Q

What the insolvency procedure where the business continues trading and is sold as a going concern

A

Administration

107
Q

Which formal arrangement imposes a fixed timetable to repay, or aims to achieve better asset realisation on winding up

A

Company voluntary arrangement

108
Q

What kind of insolvency procedure is a contract based compromise - is not formal insolvency

A

Consensual agreement

109
Q

Fifth stage in IP

A

MINUS the prescribed part (to be added back in later)

110
Q

Who usually decides time to appoint A, and who usually appoints - why

A

QFCH time, Ds appoint - protects QFCH reputation

111
Q

Why is a FCR not an LPA ‘25 receiver

A

Further powers

112
Q

Why can QFCH essentially override any decision on choice of A

A

Interim period for court appointment + 5 days’ notice if out of court

113
Q

Under which kind of liquidation is the company solvent

A

Members voluntary liquidation

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