Ch 16 - Company Conclusion and Administration Flashcards
state the function of a liquidator and discuss the powers of a company
liquidator. Outline also how the appointment of the liquidator ends
The role of a liquidator is to ensure that the company’s assets are realised, received and distributed to the
company’s creditors.
If there is a surplus that it is to be distributed to those entitled persons.
Powers of a Liquidator:
These are defined in The Insolvency (Northern Ireland) Order 1986 Part 1 Schedule 2. With the sanction of
the court or the committee of creditors, the liquidator can:
(i) bring and defend actions on behalf of the company;
(ii) carry on the company’s business to enable it to be wound up beneficially;
(iii) pay any class of creditors in full;
(iv) make any compromises with creditors, contributories or debtors.
Without sanction the liquidator can:
sell the company’s property;
(v) draw, accept and endorse bills of exchange in the company’s name;
(vi) raise money on the security of assets and appoint an agent;
(vii) appoint a solicitor to assist him;
(viii) execute deeds;
(ix) prove in the bankruptcy or insolvency and do all such things necessary to wind up the company.
The appointment of the liquidator will end when the liquidator is:
(i) removed by an order of the court;
(ii) resigns;
(iii) ceases to be qualified as a liquidator;
(iv) is released after conclusion of the wind-up.
Outline the rules governing the priority of debts in the event of a company’s liquidation.
Priority of Payment: (1) costs of liquidation, (2) debentures secured by fixed charges, (3) preferential debts
(including employees), (4) debentures secured by floating charges, (5) unsecured creditors, e.g., Crown
debts, and (6) shareholders (first preference, then ordinary).
Explain what is meant by Administration. State the various persons who can apply to the court to appoint an
administrator;
Administration in Northern Ireland is governed by Part III of The Insolvency (Northern Ireland) Order 1989.
(a) Administration is an alternative process to liquidation for a company that is in financial difficulty. The
purposes of administration are:
(i) to enable the company to survive and carry on trading; and
(ii) to achieve a more advantageous results for the creditors than if the company went straight into liquidation.
Persons who can apply to the court include (1) the company (2) company directors (3) creditors.
Explain the role of an Administrator.
Role of an Administrator (Article 27-29 of the Insolvency (Northern Ireland) Order 1989 as amended by S.I.
2015/1493 reg. 8(2))
(i) notify company of their appointment;
(ii) examine statement of the company’s affairs from company officers;
(iii) put forward proposals to the company in order for it to achieve the purposes of administration;
(iv) call a meeting with the creditors within ten weeks of his appointment to discuss proposals for rescue.
What are the methods by which an administrator may be removed from office?
Removal of an administrator
(i) when the period of administration comes to an end;
(ii) if the administrator applies to court stating the purpose of administration has been achieved or that it cannot
be achieved;
(iii) a creditor may apply to the court to have the administrator removed;
(iv) when the administrator is no longer qualified to hold office.
How is a company is ‘protected’ by the process of administration?
Company ‘Protection’: when a company is protected under administration a company cannot be put into
liquidation:
(i) no-one can try to wind up the company;
(ii) the company cannot put itself into voluntary liquidation;
(iii) no legal proceedings can be brought against a company by its creditor.
What is the maximum period of time that a company can remain in the process of administration?
Maximum period: a company can remain in administration for 12 months and this can extended by a further 6
months with the approval of creditors or the court.
What are the advantages of administration over liquidation?
(i) the company is not wound up but given another chance to restructure and recover;
(ii) creditors may have a better chance of having their debts repaid in full as purpose of administration is to
achieve best result for creditors.
