BLP Flashcards
DIRECTORS LIABILITY/VOIDABLE TRANSACTIONS
What is the test for insolvency:
1. for fraudulent/wrongful trading; and
2. For voidable transactions
- For fraudulent/wrongful trading: balance sheet test
- For voidable transactions: balance sheet OR cash flow test
DIRECTORS’ LIABILITY/VOIDABLE TRANSACTIONS
When is the onset of insolvency for:
1. Administration (court/out of court procedure); and
2. Liquidation (CVL and MVL/compulsory)
- Administration
Court procedure: date of filing application/NOI to appoint
Out of court procedure: date of appointment - Liquidation
CVL and MVL: date of resolution for winding up
Compulsory: date of presentation of petition
DIRECTORS’ LIABILITY/VOIDABLE TRANSACTIONS
What presumptions operate for connected persons in:
1. TUV
2. TDC
3. Preferences
4. Avoidance of floating charges
- If TUV made with connected person, insolvency presumed
- No presumption
- If preference made with connected person, desire to prefer presumed
- If floating charge granted to connected person, insolvency presumed
(only presumed where transaction made with relevant period)
NO PRESUMPTION OF INSOLVENCY FOR PREFERENCES WITH CONNECTED PERSON
FRAUDULENT TRADING
What are the two requirements for the any person test to apply?
- Person knowingly carries on business of the company despite financial difficulties; and
- Does so with the intent to defraud creditors
PARTNERSHIPS AND LLPS
What kind of tax will an LLP pay on the profits it makes?
None - an LLP is transparent for tax purposes
This means that the individual partners are personally liable for the tax on the profits of the partnership that they each take home (same as a traditional partnership)
COMPANY PROCEDURE
What needs to be filed to comply with CA06 requirements after a private company with only one type of share issues more of that type of share? And with whom should it be filed?
- The special resolution disapplying existing shareholders’ pre emption rights within 15 days of it being passed; AND
- SH01 form (informs CH about the new allotment of shares inc nominal value, number of shares etc) within a month of the allotment
Both should be filed with the Registrar of Companies
CORPORATE INSOLVENCY
Which of the companies creditors may apply for an administration order in respect of a company?
One or more creditors may apply to court for an administration order in respect of a company
There is no requirement for their debt to be secured
DEBT FINANCE
Is a floating charge given to a connected person within two years of winding up ever valid?
A floating charge given to a person within two years of winding up is prima facie invalid save to the extent of consideration given to the company at or after the time of creation of the charge on all such consideration
Ie only valid for loans made at or after time of creation even where not made expressly for later loan
PERSONAL INSOLVENCY
When can a creditor have a sole trader declared bankrupt?
A creditors’ petition for bankruptcy requires that at the time of presentation of the petition the debtor is unable or has no reasonable prospect of paying the debt
To establish this ground, creditor must show either:
* Debtor has not satisfied a statutory demand for an unsecured liquidated sum exceeding £5k within 3 weeks of service of the demand (and it has not been set aside by the court); OR
* Creditor has an unsatisfied judgment/other order against the debtor
What happens where a company attempts to use rollover relief to purchase an asset using a lesser sum from the original sales proceeds?
The full proceeds of sale must be used to roll over the whole gain realised on the original asset
If a lesser sum is used, the difference between the sale proceeds of the original asset and the cost of the new asset become chargeable to tax immediately
So if O Ltd sells property for £60k with a chargeable gain of £40k, and wishes to use only £50k of the total proceeds to buy new property (of the same kind) then £10k of the 40 becomes chargeable to tax
This means that only £30k can be taken of the 50 and therefore the value of the new property for CGT purposes going forward is £20k
BUSINESS MODELS/VAT
If a sole trader runs multiple businesses and together their taxable supplies exceed the registration threshold of £90k but individually none of them do, will he have to register for VAT?
Yes.
A person must register for VAt if at tan month end taxable supplies made by them, regardless of number of businesses, during the past year exceed £90k.
The person can only have 1 VAT registration irrespective of the number of businesses they run
LLPs/PARTNERSHIPS
What determines the potential liability of members’ in an LLP to creditor in the event that it becomes insolvent?
Members’ liability will be determined by the LLP (members’) agreement where it contains provisions relating to such
Members’ liability could be reduced to as little as £1 or even excluded altogether
Default position = members liable up to own contributions (I think)
There also situations where a member/members may be personally liable (eg negligent misstatement)
PARTNERSHIPS/LLPs
What is a PSC in the context of an LLP?
4 ways member can be considered PSC:
* holds rights over more than 25% of surplus assets on a winding up
* holds more than 25% of voting rights of members as a whole
* Holds the right to appiont/remove majority of those involved in management
* Otherwise has the right to/actually does exercise significant influence or control
COMPANY PROCEDURE
What is the resolution required to change a company’s name?
Special resolution
COMPANY PROCEDURE
What are the requirements of a written resolution?
- Resolution must go to all eligible members (must be done in hard copy, electronically or through the website)
- Must be accompanied by statement explaining how member can consent to resolution and date by which must be passed (usually 28 days following circulation of resolution, subj to articles)
- Must be passed by requisite majority of total SHs by end of 28th day
