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BLP Flashcards

1
Q

What resolution is required to approve a long-term service contract?

A

Ordinary.

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2
Q

What resolution is required to ratify a director’s breach of duty?

A

Ordinary.

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3
Q

What resolution is required to appoint or remove a director?

A

Ordinary.

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4
Q

What resolution is required to appoint or remove an auditor?

A

Ordinary.

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5
Q

What resolution is required to authorise a substantial property transaction?

A

Ordinary.

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6
Q

What resolution is required to temporarily suspend MA14?

A

Ordinary.

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7
Q

What resolution is required to authorise a directors’ loan?

A

Ordinary.

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8
Q

What resolution is required to authorise a payment for loss of office?

A

Ordinary.

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9
Q

What resolution is required to activate s550 CA 2006?

A

Ordinary.

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10
Q

What resolution is required to authorise directors to allot shares?

A

Ordinary.

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11
Q

What resolution is required to remove the ASC clause in the company’s articles?

A

Ordinary.

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12
Q

What resolution is required to authorise a buyback contract?

A

Ordinary.

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13
Q

What resolution is required to change the name of a company?

A

Special.

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14
Q

What resolution is required to change the company’s articles of association?

A

Special.

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15
Q

What resolution is required to disapply pre-emption rights?

A

Special.

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16
Q

What resolution is required to approve the re-registration of a private company as a public company?

A

Special.

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17
Q

What resolution is required to authorise payment out of capital?

A

Special.

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18
Q

Which business mediums can offer floating charges?

A

Companies and LLPs.

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19
Q

What is MA14?

A

The article which prevents directors from voting when they have a personal interest in the subject matter of a vote.

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20
Q

If a company seal is used to execute a document, what other formalities must be observed?

A

The document must also be signed by at least one authorised person in the presence of a witness who attests the signature.

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21
Q

When is the accounting reference date for a company on incorporation?

A

The last day of the month in which it was incorporated.

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22
Q

How can an accounting reference date be changed?

A

Board resolution.

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23
Q

What is the maximum accounting reference period?

A

18 months.

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24
Q

When is an ordinary resolution required to approve a service contract?

A

When the guaranteed term is for more than two years.

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25
Q

What happens if a director has a personal interest in a proposed transaction/arrangement?

A

They must declare the nature and extent of the interest to the board.

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26
Q

How are board resolutions passed?

A

Simple majority on a show of hands (if there is a chairperson, in the event of a tie they will have a casting vote).

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27
Q

How can directors make decisions without calling a board meeting?

A

Under MA8, if all eligible directors have indicated to each other that they share a common view (i.e. if a matter is unanimously agreed), it can be passed by written board resolution.

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28
Q

What is a general meeting and how are they called?

A

A shareholders’ meeting; by directors’ board resolution (if they want the shareholders to pass a special resolution or if the shareholders have requested one).

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29
Q

What formalities must be observed prior to a general meeting?

A

The directors must give notice to every shareholder, director, and the auditor if there is one, in hard copy or electronic form/website, which says the time/date/place of meeting, the general nature of the business to be dealt with, if a SR is proposed the exact wording of it, and the shareholders’ right to appoint a proxy to attend and vote on their behalf.

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30
Q

What is the minimum notice required for a general meeting?

A

14 clear days.
If the notice is sent by post or email, it is deemed received 48 hours after if it was handed out.

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31
Q

How does voting work at general meetings?

A

Show of hands, with each shareholder having one vote.

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32
Q

Are the shareholders prevented from counting in the quorum or voting if they have an interest in a matter?

A

No, unless it is a resolution to buy back some/all of their shares or to ratify a director’s breach of duty if that director is also a shareholder.

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33
Q

What is a poll vote?

A

Where the shareholders vote in a general meeting on the basis of one vote per share owned rather than one per shareholder.

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34
Q

Who can demand a poll vote?

A

The chair of the meeting, the directors, two or more people with the right to vote on the resolution, or a person/people representing not less than 10% of the total voting rights of the shareholders who have the right to vote on the resolution.

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35
Q

When can a poll vote be demanded?

A

Before or during the general meeting.

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36
Q

When can a general meeting be held on short notice?

A

If a majority of shareholders who between them have 90% or more of the voting shares (95% in public companies) consent.

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37
Q

How do shareholders’ written resolutions work?

A

The board distributes a written resolution setting out the wording of the proposed resolutions and the shareholder signs and returns it if they are in favour. The written resolution must be sent to every eligible member and must include how to signify agreement and the deadline for returning the resolution (generally 28 days from circulation).

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38
Q

How are written resolutions passed?

A

When the required majority of eligible votes signify agreement to the resolution; each shareholder has one vote per share owned (similar to a poll vote).

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39
Q

When can shareholders require the company to circulate a written resolution?

A

When they have 5% or more of the voting rights in the company.

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40
Q

What happens if the shareholders want the directors to call a general meeting?

A

The directors must call it within 21 days and the meeting must be held no later than 28 days from the date of notice of the GM.

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41
Q

What is a small company?

A

One with a balance sheet total of no more than £5.1m, a turnover of no more than £10.2m, and no more than 50 employees.

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42
Q

What is a micro-entity?

A

A company with a balance sheet total of no more than £316k, turnover of no more than £632k, and no more than 10 employees.

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43
Q

When must companies file their accounts?

A

Private: nine months from the end of the accounting reference period.
Public: six months from the end of the reference period.
Newly incorporated companies can choose to file three months after the end of the first accounting reference period.

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44
Q

When must companies file their confirmation statement?

A

Within 14 days from the anniversary of its incorporation.

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45
Q

When must companies issue share certificates?

A

Within two months of the allotment or two months of a transfer of shares being lodged with the company.

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46
Q

What is a Bushell v Faith clause?

A

A clause within a shareholders’ agreement which gives shareholders weighted voting rights if the resolution under consideration is to remove them from office as a director.

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47
Q

In what way can a preference shareholder have ‘enhanced’ rights over an ordinary shareholder?

A

It varies but could include for example the guaranteed right to a dividend (ordinary shareholders would then only receive dividends if there are still profits leftover).

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48
Q

What is meant by a cumulative preference share?

A

The preference shareholder has to be paid any missed dividends from previous financial years as well as the current year if there is enough profits available.

For non-cumulative preference shares, if a dividend is not paid in a specific year, the shareholder loses their right to the dividend and will not receive it in the future.

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49
Q

What is an unfair prejudice petition?

A

An order for a remedy where a shareholder feels they have been unfairly prejudiced as a shareholder.

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50
Q

What is a derivative claim?

A

A claim instigated by a shareholder for a wrong done to a company that has arisen from an act/omission of a director.

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51
Q

What is the required shareholding to pass all resolutions?

A

100%.

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52
Q

What is the required shareholding to pass a special resolution?

A

75%.

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53
Q

What is the required shareholding to pass an ordinary resolution?

A

Over 50%.

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54
Q

What is the required shareholding to block an ordinary resolution?

A

50%.

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55
Q

What is the required shareholding to block a special resolution?

A

Over 25%.

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56
Q

What is the required shareholding to demand a poll vote?

A

10%.

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57
Q

What is the required shareholding to circulate a written resolution requisitioning a general meeting and circulate a written statement?

A

5%.

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58
Q

How can directors be appointed?

A

Board resolution or ordinary shareholders’ resolution.

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59
Q

How can MA14 be temporarily suspended?

A

Ordinary resolution.

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60
Q

If a director is removed by ordinary resolution, what procedure must be followed?

A

Special notice is required, which means the ordinary resolution is not effective unless notice of the intention to pass it has been given to the company at least 28 days before the GM at which it is proposed.

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61
Q

What are the remedies for breach of a director’s duties?

A

Account of profits, equitable compensation for loss suffered by company, rescission, injunction, restoration of property transferred.

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62
Q

How can a directors’ breach of duty be ratified?

A

Shareholders’ ordinary resolution.

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63
Q

What is the consequence of a directors’ failure to declare an interest in an existing transaction?

A

It is a criminal offence punishable by fine.

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63
Q

In a wrongful trading claim, when can the court order a director to contribute to the company’s assets?

A

The company has gone into insolvent liquidation/administration; before commencement of the winding up of the company the director knew or ought to have known the company had no prospect of avoiding insolvent liquidation; the person was a director of the company at the time.

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64
Q

What defence is available for wrongful trading?

A

If the director took every step with a view to minimising the potential loss to a company’s creditors. The test considers the general knowledge/skill/experience that would reasonably be expected of a person carrying out the functions of that director, and the general knowledge/skill/experience that director has.

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64
Q

When will a director be liable for fraudulent trading?

A

If in the course of the company being wound up it appears that the company’s business has been carried on for any fraudulent purpose.

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64
Q

What is an SPT?

A

A transaction where a director in their personal capacity or someone connected with a director buys from or sells to the company a non-cash asset of substantial value.

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65
Q

How can an SPT be approved?

A

Ordinary resolution.

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66
Q

What is a person connected with a director?

A

A member of the director’s family or a company in which the director or person(s) connected with them has at least 20% of the shares or can exercise/control more than 20% of the voting power at a GM.

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67
Q

When is a transaction ‘substantial’?

A

If its value is over £100,000, or over £5,000 and more than 10% of the company’s net asset value.

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68
Q

What is the consequence of a company proceeding with an SPT without an ordinary resolution?

A

It is voidable and those who have benefitted may need to account for gain or indemnify against loss/damage.

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69
Q

How can a directors’ loan be granted?

A

Ordinary resolution.

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70
Q

When is an ordinary resolution not required to grant a directors’ loan?

A

Loans of up to £50k for company business/allowing director to properly perform duties, expenditure on defending civil/criminal proceedings concerning the company, expenditure on defending regulatory investigation, minor/business transactions as long as they do not exceed £10,000.

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71
Q

When does a payment for a director’s loss of office require an ordinary resolution?

A

If it exceeds £200.

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72
Q

What is an ASC?

A

This applies to pre-CA 2006 companies, it is the authorised share capital i.e. the upper limit on number of shares the company can have. Post-CA 2006 will likely have a similar provision in its articles. This can be changed by special resolution (as the articles need changing). For pre Oct-2009 companies, check whether articles updated, and if not pass OR to remove ASC.

73
Q

When can directors allot shares without shareholder input?

A

In private companies, if the company was incorporated after Oct 2009 and there is only one class of shares.
If it is a pre CA-2006 company, an OR must be passed to ‘activate’ s550 (which allows allotment without shareholder approval).

74
Q

When is the shareholders’ permission required to allot shares?

A

Public companies or private with more than one class of shares needs an ordinary resolution stating the max shares that can be allotted and date on which authority will expire (max 5y).

75
Q

What are pre-emption rights?

A

Existing shareholders’ rights of first refusal over shares which are being allotted (i.e., they must first be offered to existing shareholders on the same or more favourable terms).

76
Q

How can pre-emption rights be disapplied?

A

Special resolution.

77
Q

How is stamp duty calculated on the transfer of shares?

A

If the sale price is over £1,000, the buyer pays stamp duty charged at 0.5% rounded up to the nearest £5 (unless the shares are a gift, in which case no stamp duty is payable).

78
Q

How is share capital maintained?

A

Dividends cannot be paid from capital (only from distributable profits) and the company generally mustn’t purchase its own shares. However, shares can be bought back if the correct procedure is follow, can purchase its own shares under a court order to buy out an unfairly prejudiced minority shareholder, and can return capital to shareholders after payment of debts in a winding up.

79
Q

How does buyback work?

A

The company repurchases its own shares out of distributable profit. Shareholders approve by OR.

80
Q

What is the procedure for buyback out of profits?

A
  1. Check no limit in articles and prepare accounts.
  2. Board meeting - discuss finance, resolve to approve draft terms of purchase, resolve to call GM/propose WR. Contract/memorandum of terms must be available to members.
  3. If using WR procedure, circulate this with contract.
    Or 4. If GM procedure, pass OR to authorise buyback contract.
  4. Board resolution to enter into contract.
  5. File return of purchase of own shares and notice of cancellation of shares within 28 days, keep contract at reg office for 10y, cancel shares and update register/PSC register.
81
Q

How can share buyback out of capital take place?

A
  1. Directors must make a statement of solvency at least a week before the GM.
  2. The SoS must have an auditors’ report annexed.
  3. Payment out of capital must be approved by SR. This is in addition to the OR required to approve the buyback contract.
  4. File SoS and auditors’ report and place notice in Gazette.
  5. Board resolves to enter into contract.
  6. Make payment out of capital.
82
Q

When can a company pay a dividend?

A

If it has profits available (i.e., its accumulated realised profits less accumulated realised losses, shown on the balance sheet under the p/l reserve).

83
Q

What is a debenture and who can enter into them?

A

A loan agreement in writing between a borrower and lender which is registered at Companies House and gives the lender security over the borrower’s assets. Companies and LLPs can enter into debentures.

84
Q

How are unsecured debts dealt with on insolvency?

A

By the pari passu principle, i.e., they are all reduced pro rata.

85
Q

Why is it riskier to buy shares in a company rather than offer a loan?

A

If the company is in financial difficulties it will not declare a dividend, and even then the payment of a dividend is usually discretionary. If the company goes insolvent, the shareholder loses the capital value of the dividends. Loans are often secured which means the lender is more likely to be repaid than a shareholder on insolvency.

86
Q

How is tax treated on equity finance vs. debt?

A

Dividend payments are not deductible expenses, they are distributions of profit after corp tax is paid. Payment of debenture interest is a trading expense so deductible prior to calculating corp tax.

87
Q

Do the Model Articles have restrictions on granting security?

A

No. This falls within a directors’ general powers under MA3.

88
Q

What are the three basic features of a floating charge?

A

They consist of an equitable charge over the whole or a class of the company’s/LLP’s assets, the assets subject to the charge are constantly changing, and the company/LLP can still deal with the assets until the charge ‘crystallises’.

89
Q

When will a floating charge crystallise?

A

Chargor goes into receivership/liquidation/ceases to trade/any other event specified in the charge document.

90
Q

What is a book debt?

A

Money owed to the company/LLP by debtors.

91
Q

How will borrowing and any grant of security be authorised by a company?

A

Board resolution.

92
Q

When must a charge be registered at CH?

A

Within 21 days of creation.

93
Q

Can the court extend the 21 day period within which a charge must be registered?

A

Yes, if the failure to deliver the documents was accidental/inadvertent or would not prejudice the other creditors/shareholders (although the charge would still only have priority from the date of actual registration).

94
Q

What is the order of charge priorities?

A

Fixed over floating; within the categories, prioritised by date of creation.

95
Q

What is a negative pledge clause?

A

A clause within floating charge documentation prohibiting the company from creating later charges that would take priority (fixed/mortgage) without the floating charge holder’s permission.
If the subsequent charge holder has actual knowledge of the NPC, their charge will be subordinate to the floating charge.

96
Q

How can contracts be entered into by a company?

A

Company seal or by a person acting under company’s authority, express or implied.

97
Q

How can a company execute a deed?

A

Affixing its seal; signatures of two authorised signatories; signature of a director in the presence of a witness who attests.

98
Q

What sections of the PA 1890 cannot be overridden?

A

ss1 and 2 (when a partnership comes into existence) and ss 5-18 (relationship between partners and third parties particularly liability for debts).

99
Q

What goes in the partnership agreement?

A

Name, place and nature of business, commencement and duration, work input, roles, decision-making, financial input, shares in income and capital profits and losses, drawings and salaries, ownership of assets, expulsion, dissolution and effect of it, goodwill, distribution of proceeds of sales, restraint of trade, dispute resolution.

100
Q

Which decisions in a partnership must be unanimous?

A

Changing nature, introducing new partner, changing terms of partnership agreement.

101
Q

What is meant by anyone who has dealt with a partnership before must be given actual notice of a partner who is leaving?

A

A notice must be placed in the Gazette and details removed from stationery.

102
Q

How is insolvency treated in partnerships?

A

An insolvent partnership can be wound up as an unregistered company or may use the rescue procedures available to companies.

103
Q

How is profit & loss calculated?

A

Chargeable receipts LESS deductible expenditure LESS capital allowances (including AIA).

104
Q

What are chargeable receipts?

A

Money received for goods/services as income.

105
Q

What is the AIA?

A

£1,000,000.

106
Q

What is the WDA of plant & machinery?

A

18% (72% is the written down value).

107
Q

When does start-up loss relief apply?

A

If a loss occurs in the first 4 tax years, it can be carried back and set against prior income.

108
Q

What is carry across/carry back relief?

A

Trading losses are set against the same or previous tax years’ total income. They must be claimed within one year.

109
Q

What is meant by relief by way of setting off against capital gains?

A

This allows the taxpayer to set trading losses against chargeable gains in the same year.

110
Q

What is carry-forward relief?

A

Trading loss can be carried forward indefinitely; must notify HMRC within 4 years.

111
Q

What is carry-back of terminal trading loss?

A

Loss incurred in the final 12 months of trading can be carried across, set against profits in preceding years.

112
Q

What is carry-forward relief on incorporation?

A

Losses can be set against income from the company; no cap; must notify HMRC within 4 years.

113
Q

What is the cap on start-up/carry-across/carry-back relief?

A

£50k or 25% of income in the year claimed.

114
Q

What are exempt supplies for VAT purposes?

A

Residential land, postal services, education, and health services.

115
Q

How is income tax calculated?

A
  1. Calculate total income.
  2. Deduct allowable reliefs for net income.
  3. Deduct any personal allowance for taxable income.
  4. Calculate tax at applicable rate(s) - NSNDI, interest, dividends.
  5. Add together amounts from step 4 for overall tax liability.
116
Q

What is the personal income tax allowance for 2023/24?

A

£12,570.

117
Q

What is the personal savings allowance?

A

Basic taxpayer £1k, higher rate £500, additional rate nil.

118
Q

What are the tax rates for NSNDI?

A

Basic 20%, higher 40%, additional 45%.

119
Q

What are the tax rates for interest?

A

Starting 0%, basic 20%, higher 40%, additional 45%.

120
Q

What are the tax rates for dividends?

A

Ordinary 8.75%, upper 33.75%, additional 39.35%.

121
Q

What is the dividend allowance?

A

£1,000.

122
Q

What is income tax relief on borrowings?

A

If an individual borrows money to buy a share in a partnership or lend money to a partnership, they can deduct the interest paid on this borrowing from total income - this is a ‘qualifying loan’. The cap on tax relief is £50k/25% of the taxpayer’s total income less allowable pension contributions.

123
Q

When do SA tax returns need to be filed and when is payment paid?

A

31 January; first payment by 31 Jan, second by 31 July, any balancing due on next 31 Jan.

124
Q

How is CGT calculated?

A
  1. Identify the disposal of a chargeable asset.
  2. Calculate the gain (deduct costs of disposal, initial and subsequent expenditure, and incidental costs of disposal).
  3. Consider reliefs.
  4. Aggregate gains/losses and deduct annual exemption.
  5. Apply the correct rate of tax: 10% basic, 20% additional, 8% surcharge for resi property. Business asset disposal relief is 10%.
125
Q

What reliefs are available for tax mitigation when disposing of a partner’s business assets?

A

Rollover relief on replacement of qualifying business assets (land, buildings, goodwill), holdover relief on gifts of business assets (gift/undervalue sale of business assets), rollover relief on incorporation of business (when an individual sells their unincorporated business to a company; rolled over into shares seller receives as consideration for sale of assets to company), business asset disposal relief.

126
Q

What is the rate of corporation tax?

A

19% if profits up to £50k; 25% if more than £250k; if between £50k and £250k, marginal rate (tapered).

127
Q

How is corporation tax calculated?

A

Calculate income profits, calculate chargeable gains, calculate total profits and apply reliefs, calculate tax at appropriate rate.

128
Q

What tax reliefs are available to companies?

A

Rollover on replacement of qualifying business assets. Carry-across/-back for trading losses (across then 12m prior), terminal carry-back for losses (3 years before the final 12 months, with later periods first), carry-forward for changing losses.

129
Q

What is a close company?

A

One with five or fewer participators or controlled by participators who are directors or shadow directors.

130
Q

What happens when a close company loans money to a participator/their associate?

A

The company must pay HMRC the equivalent of 33.75% of the loan, which is repayable when the participator/associate repays the loan or the loan is written off. No tax is payable if loan is in ordinary cause of business or loan is no more than £15k, borrower works FT, and owns no more than 5% ordinary shares.

131
Q

How is the net worth of a business calculated?

A

Assets - liabilities.

132
Q

What is employment of capital?

A

Where the money is now.

133
Q

What is capital employed?

A

Where the money came from.

134
Q

When is a company insolvent?

A

When a creditor has served a statutory demand for £750+ and it is unpaid/no arrangement reached within 21 days.
When a creditor has obtained judgement against the company and tried to enforce and the debt has not been paid in full/at all.
If it can be proved to the court than a company cannot pay its debts as they fall due.
If it can be proved to the court that the company’s liabilities exceed its assets.

135
Q

What possible outcomes are available to an insolvent company?

A

Liquidation, administration, CVA, moratorium, restructuring.

136
Q

What routes are open to secured creditors with regards to an insolvent company?

A

Appoint an LPA receiver, appoint an administrator out of court, or (if security created before 15/09/03) appoint an administrative receiver.

137
Q

What is liquidation/winding up?

A

The process whereby the business stops trading, its assets are sold, and the company ceases to exist. The directors’ powers cease and the liquidator runs the company.

138
Q

What do liquidators do?

A

They review past transactions to see if any can be challenged, and distribute the assets to the creditors, then the company is dissolved at Companies House.

139
Q

What are the three types of liquidation?

A

Compulsory, CVL, MVL.

140
Q

How is compulsory liquidation commenced?

A

A third party presents a winding up petition at court.

141
Q

When will a petitioner be prevented from proceeding with a winding up petition?

A

If the company can show there is a genuine and substantial dispute regarding the money owed.

142
Q

What is creditors’ voluntary liquidation?

A

The company initiates winding up (usually under pressure from creditors).

143
Q

When is members’ voluntary liquidation available?

A

This is only available if the company is solvent (if during MVL the liquidator realises the company is insolvent it must be converted to a CVL). Prior to commencing MVL, directors must swear a stat dec that the company is solvent.

144
Q

What duties are liquidators and administrators under?

A

To maximise the assets available to creditors.

145
Q

When are floating charges automatically void?

A

In the relevant time, a charge was granted without the company receiving fresh consideration in exchange for granting security. The relevant time is during the two years preceding insolvency it was created in favour of a person who is connected with the company, or in favour of any person during the twelve months prior to insolvency.

146
Q

What is a preference?

A

Where the company puts a person in a better position, in the event the company went into insolvent liquidation/administration, than they would have been otherwise, if a preference is given in the relevant period (two years for connected person of 6 months for any other person). The company must have been insolvent at the time of giving the preference or have become insolvent as a result of giving it. This must be influenced by a desire to put the person in a better position.

147
Q

What is a transaction at an undervalue?

A

A gift or transaction where the company receives significantly low consideration made by a company to another person within the 2 years preceding insolvency. The company must have been insolvent at the time or become insolvent as a result. There is a rebuttable presumption in favour of insolvency where the transaction was in a connected person. The defence is the transaction was entered into in good faith for the purpose of carrying on the business and there were reasonable grounds for believing it would benefit the company.

148
Q

What is an extortionate credit transaction?

A

Grossly exorbitant payments, in 3 years preceding liquidation.

149
Q

What is a transaction defrauding creditors?

A

A transaction at an undervalue which the company entered into to put assets beyond the reach of someone making a claim or prejudice that person’s interests.

150
Q

When is a creditors’ claim effectively admitted automatically?

A

When it is less than £1,000.

151
Q

What is the order of payments once assets are sold and fixed charges paid?

A
  1. Expenses of winding up.
  2. Preferential debts (rank and abate equally).
  3. Floating charges (in order of priority).
  4. Unsecured creditors (rank and abate equally).

Remainder to shareholders.

152
Q

What is a preferential debt?

A

Wages/salaries of employees for 4 months preceding liquidation (max £800 per employee) and employees’ accrued holiday pay. Then HMRC but for taxes collected on HMRC’s behalf (PAYE/VAT, not corpo tax).

153
Q

What is ring fencing?

A

A statutory procedure whereby the available money for floating charge holders is set aside for the benefit of unsecured creditors. The amount to be set aside is 50% of the first £10k from the property subject to floating charges and 20% of the remaining money, up to £800k (or £600k for charges before 6 Apr 2020).

154
Q

What are alternatives to liquidation?

A

Administration, CVAs, schemes of arrangement, restructuring plans, moratorium, informal agreements with creditors.

155
Q

What are schemes of arrangement?

A

They are not strictly an insolvency procedure. They involve coming into an agreement with creditors, not necessarily when the company is insolvent. They necessitate two hearings & meetings between creditors & shareholders.

156
Q

What are restructuring plans?

A

They are similar to schemes of arrangement and were brought in by CIGA 2020. The difference is that it is easier for a restructuring plan to be sanctioned by the court, even if creditors/members vote against it.

157
Q

What is administration?

A

The process whereby an administrator is appointed to run a company and make the necessary changes to improve its financial performance, so it can be sold as a going concern. It provides a statutory moratorium.

158
Q

Whose best interests does the administrator act in?

A

The company’s creditors.

159
Q

How is administration commenced?

A

Application to the court or appointment by company/directors/QFCH.

160
Q

How does administration work?

A

The administrator puts forward proposals for the company to the creditors. They are approved if a majority of creditors in value vote in favour, however if more than 50% of the creditors who vote against the plan are unconnected creditors, the plan will not be approved.

161
Q

How does administration end?

A

Automatically after a year but can be shortened/lengthened.

162
Q

What is a CVA?

A

A binding written agreement for the company’s creditors to either wait longer to receive what they are owed, accept part payment of the debt, or both.

163
Q

How are proposals for payment of creditors under a CVA approved?

A

If they are approved by 75% or more of creditors, with 50% or more being non-connected.

164
Q

What is a moratorium under CIGA 2020?

A

A measure where the company is protected from actions by creditors relating to pre-moratorium debts, but must pay debts incurred during the moratorium in full. The company must be unable to pay its debts or unlikely to be able to. It is available for English companies with no outstanding winding up petition. It lasts 20 business days from the day after it comes into force and can be extended by 20 further BDs to a max of one year.

165
Q

What is an LPA receiver?

A

A receiver appointed by a fixed charge holder, to sell the charged property to reclaim what is owed. If it is not all repaid the remainder becomes an unsecured debt. If there is a surplus the additional goes to the company.

166
Q

What is an administrative receiver?

A

They are appointed by floating charge holders when the floating charge is over the whole undertaking (usually for pre-15/09/23 charges only).

167
Q

When is an individual insolvent?

A

When a debt is payable but the debtor does not have enough money to pay, or if it is payable in the future but the debtor has no reasonable prospect of payment.

168
Q

How can insolvency be proved by a creditor?

A

Serving a statutory demand for £5000+ and seeing if they pay/apply to set aside within 3 weeks.
Serving a stat demand for a future liability of £5k+ and seeing if they show a reasonable prospect of paying when it falls through/apply to court to set aside.
Obtaining a judgement for £5k+, attempting to enforce, and being unable to.

169
Q

What options are available to an insolvent person?

A

Talk to creditors to come to an agreement, apply for own bankruptcy, enter IVA, apply for debt relief order. Also maybe new Debt Respite Scheme.

170
Q

What is bankruptcy?

A

Debtor’s assets pass to trustee in bankruptcy who pay as many debts as possible. After 1 year the bankruptcy is discharged.

171
Q

How does bankruptcy begin?

A

A creditor presents a petition at court or the debtor applies online.

172
Q

What is an Official Receiver?

A

The trustee in bankruptcy.

173
Q

What can a bankrupt keep?

A

Items they need for work and everyday household items (although expensive items can be sold and replaced with cheaper). Still paid salary but if more than reasonable trustee can ask them to agree to income payments agreement or apply for an income payments order (3 years max).

174
Q

Can the bankrupt’s interest in a home be taken from them?

A

Home can be sold if trustee has a court order. After 1 year the creditors’ interests usually are most important so likely trustee will get order for sale. 3 years after the bankruptcy order ownership of the home goes back to the bankrupt unless trustee has sold it, obtained an order for sale/possession/charging order, or entered agreement with bankrupt.

175
Q

What can a trustee in bankruptcy do to increase assets?

A

Disclaim onerous property, apply to set aside transactions at an undervalue (in 5y prior to petition or 2y prior and bankrupt was insolvent), preferences, defrauding creditors, extortionate credit.

176
Q

How are a bankrupt’s assets distributed?

A

Costs of bankruptcy, preferential debts, ordinary unsecured creditors, postponed creditors (bankrupt’s spouse/CP).

177
Q

What can happen after a bankruptcy order is discharged?

A

BRO/BRU.

178
Q

What restrictions do undischarged bankrupts face?

A

Cannot obtain credit for over £500 without informing lender.

179
Q

What is an IVA?

A

It is similar to a CVA - a binding agreement between unsecured creditors setting out what they each receive. Proposals are agreed if 75%+ of creditors in value approve, with at least 50% not being associates of the debtor.

180
Q

What is a debt relief order?

A

An order for debtors with low assets and liabilities. Debts max £20k, assets max £1k, car max £1k, disposable income max £50pm, cannot have been subject to DRO in preceding 6 years or be subject to another formal insolvency procedure. The debtor is then protected from enforcement action for 12 months.

181
Q

What is the Debt Respite Scheme (‘Breathing Space’)?

A

Standard - legal protection from creditors for 60 days. Mental health - as long as mental health crisis treatment lasts, plus 30 days. To be granted, must apply to debt advice provider, and the advisor must be satisfied debtor cannot pay some/all debts as they fall due.

182
Q

When is corporation tax payable?

A

9 months after the end of the accounting period.

SQE2 (2 decks)

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