!!!!!!! BUSINESS LAW 1 Flashcards
2 types of business medium and examples?
- unincorporated business (sole traders, partnerships)
- incorporated business (limited companies (private and public) and limited liability partnerships)
what is a sole trader?
a self-employed person who is the sole owner of their unincorporated business
sole trader- advantages and disadvantages
ADVANTAGES
- no specific formalities or legal process required to set up the business
- additional costs of setting up a business are avoided (but do still need to register with HMRC and register for VAT)
- no onerous ongoing formality, decision making, filing and disclosure requirements
DISADVANTAGES
- unlimited liability (the business owner is personally and directly responsible for any debts and liabilities incurred)
- No legal separation between the business and the sole trader’s personal assets/affairs
SUMMARY
MORE PRIVATE, LESS EXPENSIVE, BUT UNLIMITED LIABILITY
what is a partnership?
An unincorporated business that exists when two or more people ‘carry on’ a business in common with a view of profit
- different from limited liability partnerships
advantages and disadvantages of a partnership
ADVANTAGES
- no specific formalities or legal process required to set up the business
- additional costs of setting up a business are avoided (but do still need to register with HMRC and register for VAT)
- no onerous ongoing formality, decision making, filing and disclosure requirements
DISADVANTAGES
- unlimited liability (the business owner is personally and directly responsible for any debts and liabilities incurred)
- No legal separation between the business and the partner’s personal assets/affairs
- if there is no partnership agreement, the Partnership Act will apply which can have some undesirable consequences
BIT OF BOTH
- under the PA there is no separation of ownership and control so the acts of one partner binds the partnership
- can be a good thing as it makes running the company simpler but can be a bad thing if they act on their own
what is a company?
an incorporated business with separate legal personality, where its members can have limited liability
what does separate legal personality mean?
- the company is a person separate from its members/shareholders and directors
- it can own property, enter into contracts, and be party to legal proceedings (sue and be sued)
- can also have perpetual succession
shareholders vs directors
shareholders
- own the shares in the company
- sometimes referred to as members
- liability is limited to any amount unpaid on their shares
directors
- general management powers to control what the company does day-to-day
- they run the company
advantages and disadvantages of incorporation
ADVANTAGES
- separate personality
- limited liability
- can grant floating charges as well as fixed charges
- company can be seen as more prestigious - they are recognised internationally
DISADVANTAGES
- some expenses to set up
- onerous ongoing formality, decision making, filing and disclosure requirements - adds to admin burden and expenses over time
- all info held at Companies House so may not be attractive to those who want commercial secrecy
public vs private companies
PUBLIC
- certificate of incorporation stating it is a public limited company
- may be limited by shares
- general public can be invited to subscribe for shares
- minimum capital requirements of £50k and shares must be at least 1/4 paid up
- subject to more stringent rules
PRIVATE
- company that is not a public company
- may be limited by shares or by guarantee
- shares cannot be offered to the general public
what are limited liability partnerships (LLPs)
- type of incorporated business and is formed by sending form LLIN01 to companies house
- cross between company and partnership
- combines features of partnerships and limited companies
- LLP has separate personality and members have limited liability
- KEY DISADVANTAGE- not as well recognised internationally as limited companies
how do you know a partnership has been formed?
- it is a question of fact
- no specific formalities are required
- have to meet the criteria of two or more people ‘carrying on’ a business in common with a view of profit
why should you have a partnership agreement? and what are some of the key default provisions in the PA?
- partnership agreement varies some of the key default provisions of the PA
- Entitlement to Capital and Income profits- BOTH SHARED EQUALLY UNDER PA
- Duration (retirement, death, bankruptcy) - PARTNERSHIP DISSOLVED EVERY TIME
- Management- ALL PARTNERS ENTITLED TO TAKE PART IN MANAGING COMPANY
- Expulsion- NO MAJORITY CAN EXPEL A PARTNER- NEED ALL TO AGREE
When is the partnership/firm liable for debts to third parties?
- depends on whether a partner had actual or apparent authority to contract on behalf of the partnership
Actual authority- partner is actually authorised to contract on behalf of beneficiaries
apparent authority-
4 questions
- is the transaction related to the partnership?
- would the partner usually be expected to have authority to make the transaction?
- does the third party know that the partner doesnt have actual authority?
- does the third party know that the partner isn’t actually a part of the firm/have suspicions that that is the case?
if the partner enters with actual authority the partnership is bound
if the partner enters with apparent authority, the partnership is bound but the partner is personally liable
If neither then the partnership is not bound and just the partner is liable
partners are liable 50/50 for all debts
liability of individual partners for past debts- retirement/joining
RETIREMENT
- not automatically no longer liable for debt
- 3 ways to release themselves from liability- deed of release from willing creditors, novation agreement from willing creditors (needs a deed to be binding) , or indemnity from continuing partners
JOINING
- not liable for past debts of a partnership
liability of future debts of a partnership after retirement
- may be liable if they don’t comply with sections 36 and 14 of the PA
S36-
- retiring partner must give notice to third parties that they are leaving
- 2 types of notice- actual and constructive
actual notice- inform them directly
constructive notice- put a note in the Gazette
S14
- must avoid being held out as a partner
- this means – doing something or allowing something to be done that suggests one is a partner which is relied upon by someone who gives credit to the firm as a result
What are the 2 ways to provide a business client with a company
- incorporating a new company (a ‘tailor-made’ company
- acquiring a company that has already been incorporated but which has not traded (a shelf company)
What must be sent to Companies House for a new company to be registered?
- application to register a company (form IN01)
- memorandum of association
- articles of association (in some circs)
- the requisite fee
Form IN01 information- company name
Name of a company must end with
- Ltd or limited- for priv limited companies
- plc or public limited company- for pub limited companies
Name cannot be chosen which
- is the same as an existing registered company
- is offensive or constitutes a criminal offence
- includes words suggesting a connection with the govt or a local authority
Form IN01- what is included?
- company name
- company type
- principle business activity
- registered office address
- articles of association
Articles of association vs model articles
- articles of association are the internal rulebook dealing with directors, shareholders, meetings and key administrative requirements
- model articles are provided for by CA and these are standard articles of association
- it is not compulsory to use these and you can either use the MAs in their entirety, MAs with amendments or a bespoke set of articles
- MAs automatically apply unless you exclude them
Proposed officers (form IN01 part 2)
- company secretary (not necessary but if there is one their name and address for service must be given)
- directors
— name, month and year of birth, nationality and business occupation of all directors must be set out
— address for service and usual address must be given unless valid reason
— private company must have at least one director- corporate directors are permitted but need at least one natural person - director can also be secretary
Form IN01 (part 3-statement of capital and initial shareholdings) and (part 5- people with significant control)
Statement of capital and initial shareholdings shows-
- initial share capital (no of shares of each type and their nominal value)
- rights attaching to different types/classes of share (eg voting rights)
- initial shareholdings- names and addresses of shareholders and details
details of People with sig control need to be set out-
- need to meet one of the following conditions
— more than 25% of the shares
— more than 25% of the voting rights
— have the right to appoint or remove the majority of the board
MUST BE OVER 25% NOT JUST 25%
Certificate of incorporation
- once Companies House has examined the documents and found them to be in order- they issue a Cert of incorporation- essentially the companies birth certificate- a company can change its name but its number remains constant
- company cannot enter into contracts until COI has been issued
- they then need to take some practical steps and have a first board meeting
- one of the things they need to do is to fix an accounting reference date, otherwise it’ll be the last day of the month of incorporation
Board meetings and general meetings definitions
Board meetings- meetings of the directors who pass board resolutions (BRs) to make decisions
General meetings- meetings of the members/shareholders, who pass ordinary resolutions and special resolutions to make decisions
Key provisions of board meetings
Calling and notice
- any director may call a BM at any time
- reasonable notice must be given to all directors (doesn’t necessarily have to be in writing)
Quorum ( min number of people that need to be present)
- 2
Voting
- show of hands or oral assent
- chairperson has the casting vote in a tie
Resolutions and majority
- simple majority required
Ordinary resolution vs special resolution
And
AGM vs GM
Ordinary
- requires simple majority (more than 50% of shareholders attending and voting at a GM)
Special
- requires 75% or more of shareholders attending and voting at a GM
AGM
- annual general meeting
- not required if formed after Oct 2006
GM
- any meeting of the members other than an AGM
Key provisions of GMS
Calling and notice
– Written or electronic notice may be given
– 14 clear days notice required(in effect 16 days as you do not include date of service and date of meeting)
– Add an extra two days notice if serving by email or post (in effect 14 clear days equals 18 days)
Quorum
– 2 (unless a one member company)
Voting
– Show of Hands unless poll vote demanded
– Poll may be demanded by the chairperson, at least two voting members, any members holding at least 10% of the voting shares
Small companies and accounts
A small company are those that satisfied two or more of the following:
– Turnover of not more than £10.2 million
– Balance sheet of no more than £5.1 million
– Not more than 50 employees
A small company is exempt from the requirement for accounts to be audited
Shadow director vs de facto director
Shadow
- a person who, although not properly appointed as a director, exercises a major influence on the directors
- the directors are accustomed to act in accordance with their instructions
De facto
- either a director who has not been properly appointed under the CA, but performs the role of director
- or a person who continues in the role of director after their term of office has expired
Appointment of directors
And
Non-executive director vs executive director - definition and appointment
Requirement for directors
– A private company must have at least one direct director and a public company must have at least two directors
Non-executive director
– A person who holds the office of director . They have frights duties restrictions and obligations under the CA, but they do not work for the company in a paid position.
– Appointment as a non-executive director is dealt with under MA 17 and maybe be done by either an ordinary resolution of the shareholders or board resolution of the directors
Executive director
– A person who as well as holding the office of director also works for the company in a paid position
– They will be entitled to a salary
Appointment as an executive director is dealt with under MA 19 and may be done by board resolution
So in practice you would be appointed under MA 17 to the office of director and this may be done by board resolution or ordinary resolution and then your appointment to the paid position will be by way of board resolution under MA19
What must the company do following appointment of an executor
Update the register of directors on the register of directors residential addresses and file form AP01 ( individual directors) or AP02 (corporate directors) as appropriate with companies house within 14 days
Directors duties
Directors of producer duties to their company I duty not to make a secret profit out of their position and act in the best interest of the company. In comparison shareholders may act in their own interests.
– To act within the companies constitution and to exercise their powers for proper purpose
– To promote the success of the company
– To exercise independent judgement
– To exercise reasonable care skill and diligence
– To avoid conflict of interest
– Not to accept benefits from third parties
– To declare interest in a proposed transaction with the company
Remedies and ratification for a directors breach of duty
– Remedies can include an account for profits (payment to the company) damages or an injunction
– Shareholders may ratify (authorise) a breach of duty by ordinary resolution. The votes of any interested director who is also a shareholder and those persons they are connected with or not count
Personal liability of directors
A director will be personally liable to 3rd parties dealing with the company where the director has given a personal guarantee or is guilty of wrongful trading , fraudulent trading or misfeasance
Wrongful trading
– A director of an insolvent company may be liable to contribute to the assets of a company by the company continue to trade, and they knew, or ought to have concluded that, there was no reasonable prospect of the company avoiding insolvency proceedings
Fraudulent trading
– A director of an insolvent company may be liable to contribute to the assets of a company by the company carried on business with the intent to defraud creditors of any fraudulent purposes
Misfeasance
– Misfeasance is essentially a breach of directors duties discovered on winding up. Personal liability may be imposed in these circumstances.
Restrictions on directors: substantial property transactions
An SPT involves the acquisition/disposal of a non-cash asset where
– The parties involved on the company and a director or a person connected to a director
And
– The asset is substantial. Its value is not £5000 or less and is either more than £100,000 or more than 10% of the companies net asset value
Therefore
– If the value of the transaction is £5000 or less it will never be substantial
– If the value of the transaction is over £100,000 it will always be substantial
– If the value of the transaction is more than £5000 but equal to or less than £100,000 it will only be substantial if the value exceeds 10% of the companies net asset value
Person connected to a director
– Family: include spouse, civil partner, romantic partner in an enduring relationship, children, stepchildren, parents and children of romantic partners (but not brothers, sisters, grandparents, grandchildren, uncles, aunts, nephews and nieces)
– Body corporate: director and persons connected with the director who own at least 20% of the company’s voting shares
Restrictions on directors: loans to directors
Subject to limited exceptions loans made to a director of more than £10,000 in total require the approval of the members by OR
The transaction will be voidable if not approved unless ratified by OR of the shareholders within a reasonable time
A memorandum of the proposed terms must be available for inspection for 15 days prior to the meeting and at the meeting
Removal of directors
Once appointed a director holds office until death, voluntary retirement, removal or disqualification
Voluntary retirement
A director may resign by serving notification of resignation on the company
Removal under section 168 of the CA
-The right of the shareholders to remove directors by ordinary resolution as an important inherent right
– Special notice of the OR is required to be given to the company of the proposed resolution (this means at least 28 days notice of the proposed resolution must be given to the company otherwise the resolution will be ineffective)
– The director concern has the right to be informed and to make representations to argue against their removal
– The company must then serve notice of the general meeting
– It is important to check the companies articles for any bushell v faith clause
– This is a clause giving shareholder – directors weighted voting rights (e.g. two votes for everyone they would normally have) on a resolution to remove them as a director
Minority versus majority shareholders
And the summary of shareholders rights based on percentages
– A minority shower holder individually holds 50% or less of the companies voting shares
– A majority shareholder individually holds more than 50% of the companies voting shares
One of the most significant powers majority shareholders have is the right to remove director under section 168 of the CA
– 100% percentage shareholding gives the owner control of the company
– 75% percentage shareholding gives the owner the ability to pass a special resolution
– 50% percentage shareholding gives the owner the ability to block an ordinary resolution
– More than 50% percentage shareholding gives the owner the ability to pass an ordinary resolution
– More than 25% percentage shareholding gives the owner the ability to block a special resolution
– Majority of number holding at least 90% of the voting shares gives the owners the ability to consent to short notice of a general meeting
– Any two voting members or any members holding at least 10% of the voting shares are able to demand a poll vote
– More than 10% percentage shareholding gives the owner the ability to refuse consent to short notice of a GM
– 5% or more with voting rights means they may circulate Britain resolutions or circulate written statement as to proposed resolutions
-5% percentage share owning means the owner may requisition a gentle meeting
Equity finance versus debt finance
Equity finance
– Equity finance is the issue (creation) of new shares in exchange for consideration received by a company it generates money/assets for a company
Debt finance
– Debt finance involves borrowing money in order to finance a business the debt may be secured or unsecured
Share issue definition
– A company must have a minimum of one shareholder on incorporation
– Following incorporation the directors of a company are responsible for share issue
– it is The process whereby new shares are allotted (created) in exchange for consideration received by the company and the member is entered onto the register of members in respect of those shares
– It can change the control of a company as the number of shares increases
Directors authority in relation to share issue
In private companies with unamended model articles of association and only one class of shares before and after the issue the directors are free to issue further shares of the same class by board resolution under MA3
– Otherwise the proposed issue of shares by the directors will require the advance authority of the members by ordinary resolution
– Any authority to issue (whether it in the articles or by way of OR) must state:
– The maximum number of shares the directors are allowed to issue
– The date when the authority will expire (generally not more than five years from the date the authority is given)
– if an OR is passed this must be filed at company‘s house within 15 days. It is one of the rare occasions were an OR needs to be filed.
Summary of the approach to take for ascertain authority to issue shares
Does the company have one unamended MAS? And two will it have one class of share (before and after issue)?
– If the answer is yes, members authority is not required and can be done by board resolution
– If the answer is no, members authority will be required and move onto next question
Was the company formed pre-the first of October 2009?
– If yes, check memorandum of association and will need OR to change
If no, check articles of association and will need SR to change
Do pre-emption rates apply in relation to share issue?
The statutory pre-emption rights dictate that generally on an issue of new shares they must first be offered to the existing members on the same or more favourable terms in proportion to their existing shareholding. They have a right of first refusal for a period of at least 14 days.
The rationale behind pre-emption rights is that they protect members where the effective issuing shares would be to weaken their control of the company. This is because when new shares are issued there is potential for an individuals percentage shareholding to decrease.
Important things to ascertain in regards to share issue
The two key questions with regard to this:
– Do the directors have authority to issue the shares?
– Do pre-emption rights apply?
The most important things to ascertain are how many types of shares the company has (authority) and whether the shares are issued wholly for cash (pre-emption)
If shares are issued, wholly or partly for non-cash assets the transaction could also be a substantial property transaction and an additional OR would be required
Payment for shares and administration/filing
Shares may be issued fully paid or partly paid although for private companies with MA’s, MA 21 states they must be fully paid
– Shares are quite commonly issued at a premium i.e. a price exceeding their base value. Any premium paid must be shown in the share premium account on the balance sheet .shares may not be issued at a discount.
Share transfer versus share transmission
Share transfer
– Share transfer involves dealing with existing shares e.g. on sale or gift. No new money or assets are generated for the company as it is essentially a transaction between the transferor and transferee whereby ownership changes.
Share transmission
– Share transmission is the transfer of shares by operation of law e.g. to personal representatives on death, or a trustee in bankruptcy. When shares are transmitted, the personal representative or trustee in bankruptcy may receive the dividends but they do not become shareholders.
– They may apply to be registered as a member or selling their capacity as PR/TIB
Share transfer process
– Transferor completes and signs of stock transfer form and sends it with the share certificate to the transferee
– transferee pay stamp duty on the STF calculated at 0.5% of the consideration paid rounded up to the nearest £5
– transferee send the stamped STF and the shares certificates to the company
– Directors pass board resolution to approve/reject the transfer directors have absolute discretion under MA 26 – check for special articles
– Transfer must be registered and the new share certificate sent to the new member within two months of the application
– The company will update details of shareholders annually on the confirmation statement
Dividends
A dividend as a payment the company makes to its members which provides them with a return on their financial investment in the company
– A dividend may only be made out of profits available for the purpose. This means that the company miscalculated accumulated realised profits to date i.e. its actual net profits to date and deduct it accumulated realised losses to date
The companies articles were further regulate when and how dividends to be paid the procedure is this
– Check profits are available
– MAS 30 to 35 – check special article
– Directors decide whether dividend ought to be declared and make a recommendation to the members in general meeting
– Members vote by ordinary resolution to pay themselves the amount as recommended by the directors or less – note that they cannot vote to pay themselves more than the recommended sum
Definition of buyback of shares and maintenance
Buyback of shares is permitted in limited circumstances due to the principle of capital maintenance
Buyback of shares
Where a company buys back its own shares and the shares are cancelled
Capital Maintenance
– A fundamental principle which states the capital provided by shareholders must be maintained and must not be returned to them as creditors rely on it
Buyback of shares as heavily regulated as it could leave the company in a financially precarious position
Shares may be brought back out of profits or in some circumstances and you should know the rules and processes involved
Buy back from profits versus buyback from capital
Buyback from profits
– A buyback of shares is only permitted where distributable profits are available
Buy back from capital
– a buyback of shares that is only permitted to the extent the distributable profits are unavailable in other words. Accompany cannot buy back out of capital if profits are available they must use these first.
Debt finance – the power to borrow/give security and types of security
The power to borrow/give security
– For a partnership this will involve checking any partnership agreement
– Accompany will have the power to borrow and Grant security unless it articles say otherwise
The process is summarised below:
– Does the company have unamended MAS?
– If yes the directors may approve by board resolution
– If no you ask if the company was formed before the 1st of October 2009
– If yes check memorandum and you can amend by SR
– If no check articles and you can amend by SR
– The types of security for a loan are a mortgage or charge and these can be fixed or floating
– A fixed charge is charged taken over a particular asset or assets. The consent of the lender is required in order to deal with the assets
– A floating charge of a charge taken over a particular class of assets and from time to time (tangible e.g. stock and/or intangible e.g. intellectual property) the company can deal with the assets without the consent of the lender until crystallisation as until then it ‘floats over’ rather than ‘fixes on’ the assets
– Crystallisation is when a floating charge fixes on the assets in the particular class at that time it usually occurs when a company becomes insolvent or any other event occur which the charge specifies will cause crystallisation e.g. nonpayment, ceasing to trade or other default
Debenture
Document which includes security in the form of a floating charge or sometimes both fixed and floating charges
Because they contain a floating charge, they can only be granted by a company or LLP
Priority of security rules
The rules are as follows
– As between validly created charges of the same type, the first in time (date of creation) will have priority
– As between a validly created fixed charge or mortgage and a floating charge, the fixed charger or mortgage will take priority (even if granted later) unless:
– The document creating the floating charge contains a negative pledge clause and
– The later fixed chargee has noticed of this prohibition at the time when it takes its charge
– Negative pledge clause is a clause in a debenture which prohibits the creation of later fixed charges without permission
Registration of charges and the process
– Generally all charges created by company may be registered at companies house
– Although registration is not compulsory the potential consequences of non-registration for a secured lender are so serious that registration is routine
Registration process
– The process involves submitting the following companies house within 21 days of the creation of the charge
– Form MR01
– A certified copy of the charge document
– The relevant fee
– The company will receive a certificate of registration and must also update it to register of charges if held
a charge that is not registered in time is void against the liquidator administrator or any creditor of the company
The debt will be payable immediately, but will be unsecured
Insolvency definition
Individual insolvency concern an individual who is insolvent and has an inability to pay their debts
– An individual may be in solvent when:
– A debt is payable immediately or at some certain time in the future and
– The debtor appears either unable to pay it or have no reasonable prospect of being able to pay it
There are three ways to show in abilities to pay
– A statutory demand has been served for a liquidated and unsecured sum of at least 5K or more payable immediately and after three weeks it remains unsatisfied i.e unpaid
– A statute demand has been served for liquidated and unsecured future liability at at least 5K in three weeks of past without reasonable prospect of payment being shown or an application to set it aside
– Attempt has been made to enforce a judgement data of at least 5K but it remains unsatisfied (e.g. bailiff or sheriffs have been sent in to recover cash or items to satisfy the debt but have been unsuccessful
Definition of statutory demand, liquidated and unsecured sum, judgement debt
Statutory demand
– A formal written demand for payment
Liquidated and unsecured sum
– an exact sum rather than one that needs to be calculated or assessed that is not secured
Judgement debt
– a debt that is deemed due following the adjustment of the court
The bankruptcy process
Bankruptcy
– Is a judicial process whereby most of the bankrupt’s assets passed to trustee and bankruptcy and the bankrupt becomes subject to restrictions
Trustee in bankruptcy
– Is a qualified insolvency practitioner and they take control of most of the bankrupt‘s property. They are under duty to maximise the funds that will be available to the creditors and distribute the bankrupt’s property.
The bankruptcy process usually starts with a creditors petition although the debtor may seek to make a debtor’s application
A debtors application is usually made as a self-help measure to avoid pressure from creditors where a creditors petition is inevitable
Investigating past transactions (bankruptcy)
The trustee in bankruptcy may investigate past transactions these include the following
– Disclaiming onerous property
– Transactions at an undervalue value
– Preferences
– Transactions defrauding creditors (undervalue transaction where there is an intention to put assets beyond the reach of someone or prejudice their interests in relation to a potential claim)
– Extortionate credit transactions (a credit transaction entered into within three years of the relevant date that involves grossly exorbitant payments or grossly contravenes ordinary principles of fair dealing)
– The rationale behind this is the trustee minimising liability or unwinding past transactions with the aim of increasing the amount available in the bankrupt estate to pay as many creditors as possible
– Owners property is any property of the bankrupt that is essentially a liability/drain on resources rather than an asset
– Transaction at an undervalue is a gift or sale of a property where the consideration received is significantly less than the value of the property
– If the undervalue is in favour of an associate there is a rebuttable presumption that the bankrupt is insolvent at the time of transaction
An associate is a relative, spouse/civil partner of their relatives, spouse/civil partners of relatives, business partners and employees, accompany controlled by a person either alone or together with their associates
Order of distribution of the bankruptcy assets
– Secured creditors
– Cost of bankruptcy
– Preferential debts
– Unsecured creditors
– Postponed creditors (spouse/civil partner of the bankrupt)
If there are insufficient funds to settle preferential debts or unsecured creditors, those within the category receive a proportionate sum of what is left
There are two types of preferential creditors/debts
– Primary preferential debts are:
– Wages will work carried out in the four months proceeding in the bankruptcy order up to a maximum of £800
– Accrued holiday pay
– Secondary preferential debts summed some owed to HMRC for PAYE AND VAT
Restrictions on bankrupt
– They must disclose their bankruptcy of obtaining credit of more than £500
– They cannot act as a director
– They must disclose their bankruptcy if trading under a different name
– They cannot be a partner
– They cannot be involved in company management promotion or formation without leave of the court
– They require the leave of the SRA to practice as a solicitor
Most bankrupts are automatically discharged after one year however bankruptcy restriction orders or bankruptcy restriction undertakings may continue to apply
Personal insolvency – alternatives to bankruptcy
– Individual voluntary arrangement (binding agreement to settle between data and unsecured creditors – it avoids the stick of bankruptcy and make of the creditors a better result than on bankruptcy)
– debt relief order (a DRO involves the right off of debts and is only available with assets and liabilities are low)
–Debt Respite scheme
Corporate insolvency – alternatives to bankruptcy
- Liquidation-different types
– Compulsory liquidation
– Creditors voluntary liquidation
– Members voluntary liquidation
Alternatives to liquidation
– Administration (involves an administrator running the company to rescue it and/or enable it to be sold as a going concern
- Company voluntary arrangements (is a binding agreement between the company and the creditors. It is essentially a formal compromise arrangement by by creditors except part payment and/or a delay in payment).
