Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Company Law > Chap 9 > Flashcards

Chap 9 Flashcards

You may prefer our related Brainscape-certified flashcards:
Civil Procedure 1L flashcards MBE flashcards MPRE flashcards
0
Q

If a company seems viable in the long-term , it would be economically wasteful to allow it to fail. Unemployment would also be a social problem.

Law allows such company to avoid liquidation through judicial management.

If JM is not appropriate or if the company cannot recover despite a JM order , the company is likely to be wound up

A

Note

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
1
Q

What is JM ?

A

A process whereby an insolvent company may be revived under the protection of the Court and the law instead of being wound up .

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

During the period of JM , the creditors may not

A

Take legal action against it for its failure to pay its debt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Process of JM

A

A petition must be made to the Court

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

The petition may be made by

A
  • the company ( pursuant to a resolution of the members )
  • the directors ( pursuant to a resolution of the directors )
  • any creditor of the company
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Petition may be presented if the petitioner considers that :

A
  • the company is or will be unable to pay its debts ( grounds for winding up )
  • there is a reasonable probability of (I) rehabilitating the company or (ii) preserving all or part of the assets of the company’s business as a going concern OR the interests of the creditors will be better served by JM than by resorting to a winding up .
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

( Petition ) - the court may

A
  • make a JM order in relation to the company
  • dismiss the application
  • make any interim order or any other order that it thinks fit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

The court may make a JM order in relation to the company if

A
  • it is satisfied that the company is or will be unable to pay its debts
  • it considers that the making of the JM will be likely to achieve any one of the following three objectives
    (1) the survival of the company , or the survival of the whole or part of its undertaking as a going concern
    (2) the approval under S210 of a scheme of arrangement
    (3) a more advantageous realisation of the company assets would be affected than on a winding up
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

A JM order remains in force for

A

180 days from the date of the making of the order unless it is discharged earlier .

The court may alternatively, upon the application of the judicial manager increase the period as it thinks fit .

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Effect of the JM order

A

If a receiver and manager had been appointed prior to the making of the JM, he shall immediately vacate office.

If any petition for the winding up of the company is pending in court , it will be dismissed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

During the lifespan of the JM order , the companies act disallows the following actions

A
  • the passing of any resolution or making of a court order for the winding up the company
  • the appointment by a floating charger of a receiver and manager of the whole of substantially the whole of the company’s property
  • the enforcement of any charge or security over the company’s property , except with the consent of the judicial manager or with the leave of the Court
  • the repossession of any goods in the company’s possession under any hire-purchase agreement , chattels leasing agreement or retention of title agreement , except with the consent of the JM or with the leave of the court
  • the taking of legal proceedings or execution of judgement ( eg: seizure and sale ) or other legal process , or ‘distress’ ( eg: temporary confiscation of tenants belongings by landlord to until payment of overdue rent is made ) against the company or its property , except with the leave of the court
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Within ___ days after the making of the JM order or such longer time as the Court may allow , the judicial manager must prepare his proposals for achieving one or more of the purposes for which the JM order was given

A

60 days

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

A meeting of the creditors must be called within ___ days after the JM order ( or such longer time as the court may allow) to approve the judicial manager’s proposals .

A

60

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

If the creditors approve the proposals, the JM must

A

Manage the affairs , business and property of the company in accordance with the proposals. He may revise the proposals from time to time but must seek the creditors’ approval at a meeting of the creditors.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

If the meeting of creditors declined to approve the judicial manager’s proposals, the court may discharge the JM order and make any other order as it thinks fit

A

Note

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is receivership

A

A situation where the property of the company is placed under control of a receiver so that it may be preserved for the benefit of the affected parties.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Similarities of JM and receivership

A

Company still exists and is not dissolved .

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Aim of receivership

A

To pay off creditors for whose benefit the receiver was appointed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

A receiver is appointed either by

Such a person is usually an

A

The court or under a power contained in a debenture.

Accountant , the official assignee or an approved liquidator

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

A receiver appointed by a debenture holder of a company must

A

Act as authorised by the debenture and trust deeds.
They act as agents of the debenture holder and their primary duty is to realise the company’s assets , to distribute the proceeds to the debenture holders in satisfaction of their claims and to return any surplus assets to the company.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Duty of receiver appointed by a debenture holder

A

Previous card answer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

The court may appoint a receiver if

A

The debenture does not contain the power to appoint a receiver ( an officer of the court )

Any interference with his discharge of duties is a contempt of court. However , he is personally liable for the contracts made by him. He will be indemnified for his actions from the assets of the company.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Company under receivership allows the directors to

A

Still continue with the company’s business using assets outside the scope of the receivership. In the event that substantial assets are placed in the hands of the receiver , the company may have to cease business.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Duty of receiver

A

To gather the assets under the charge and sell them to pay off the creditors.

24
Q

The receiver has the duty to

A

Take reasonable care to ensure that the true market value of the company’s assets is realised before the proceeds are distributed in satisfaction of the claim .
The receiver is responsible for any misapplication or retention of money or property where he is guilty of misfeasance , breach of trust of duty and may be liable to legal action

25
Q

What is winding up

A

Process whereby a company’s existence is brought to an end

26
Q

Winding up

A

Every member becomes liable to contribute to the assets of the company.

  • company limited by shares : member is only liable to contribute up to the unpaid portion of all his shares
  • company limited by guarantee , only liable to contribute to the assets of the company in the event of wounding up
27
Q

Two types of winding up

A

Voluntary

Compulsory

28
Q

Voluntary winding up

A

Initiated by the passing of a special resolution by the members of the company

However if the memorandum or articles stipulate a time or an event on the occurrence of which the company is to be dissolved , then an ordinary resolution will be sufficient to wind up the company.

A voluntary winding up may proceed either as a member’s voluntary winding up or as a creditors’ voluntary winding up

29
Q

The type of voluntary winding up depends on whether

A

The directors of the company have made a written declaration of the company’s solvency

30
Q

Compulsory winding up

A

A winding up by the court is initiated by the presentation of a petition to the court for the winding up of the company.

31
Q

Only the following persons may petition for the winding up of a company :

A
  • the company itself
  • any creditor
  • a contributory ( any person who is liable to contribute to the assets of the company , eg: holder of unpaid or partly paid shares )
  • liquidator of a company , who is appointed under a voluntary winding up and is if the opinion that the voluntary winding up should proceed as a compulsory winding up
  • a judicial manager
  • the Minister on any of the following grounds :
    (1) that the public company has failed to lodge the statutory report it hold the statutory meeting
    (2) that the number of members has fallen below two
    (3) that the company has carried on illegal multilevel marketing g or pyramid selling
    (4) that the company is being used for an unlawful purpose or for purposes prejudicial to public peace , welfare or good order in Singapore , or against national security of interest
32
Q

In a petition for a winding up by the court , _________________________ must be stated .

A

The ground on which the winding up order is sought

33
Q

S254
Various grounds upon which the company may be compulsorily wound up , including those mentioned in the minister’s petition

A
  • the company decides by special resolution that it would be wound up by the court ( rather than voluntarily )
  • the company does not commence business within a year from its incorporation or suspends its business for a whole year
  • the directors of the company have acted in their own interests ( or in any other manner ) so as to be unjust or unfair to other members
  • company unable to pay its debts
  • the court is of the opinion that it is just and equitable that the company be wound up
34
Q

A company will be presumed to be unable to pay its debts if any of the three instances cab be proved to the satisfaction of the court :

A

(A)

  • It owes a creditor more than $10k
  • Payment of that sum is already due
  • The creditor has served on the company a notice of demand requiring the company to pay the sum due
  • the company has neglected to make payment within three weeks after the notice had been given

(B) its fails to pay up on any judgement debt ( ordered by the court ) which it owes to a judgement creditor.

(C) it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts

35
Q

The presumption of inability to pay debts can be rebutted by

A

Contrary evidence

36
Q

A new ground allows the court to make an order that interest in shares held by one or more members of the company be purchased by the company or other members of the company instead of winding up the company

A

Need to know !

37
Q

Commencement of compulsory winding up

A

Winding up is deemed to have commenced at the time of the presentation of the petition for winding up.
The only exception is where the winding up process begins with the passing of a resolution for voluntary winding up ( in this rare case , the winding up would be deemed to have commenced at the time of the passing of the resolution ) .

38
Q

Notification of winding up :

When a company is being wound up , it must

A

Indicate its status on all of its correspondence documents

39
Q

Effect of the presentation of a petition / commencement of compulsory winding up :

Once a petition to wind up the company has been presented , the company or any creditor or contributory may apply to the court to restrain further proceedings of any actions already brought against the company at any time before the presentation of the winding up petition

A

Need to know !

40
Q

Effect of the presentation of a petition / commencement of compulsory winding up :

Any disposition of the property of the company or transfer of shares or alteration in the status of the members made after the winding up has commenced is ____ unless __________.

A

Void

The court otherwise orders .

41
Q

Effect of the presentation of a petition / commencement of compulsory winding up :

Any attachments , sequestration, distress or execution put in force against the estate or effects of the company after the commencement of winding up will be ____.

A

Void

42
Q

Effect of the presentation of a petition / commencement of compulsory winding up :

When a winding up order has been made , no action is to proceed or be commenced against the company except __________

A

With the leave of the court .

43
Q

A person may not act as a liquidator unless he is an

A

Approved company auditor .

An approved company auditor may apply to the minister to be an approved liquidator.
The approval expires on 31 March in the third year following the year in which the approval was given and may be renewed.

44
Q

In a compulsory winding up , the ______________ will act as the liquidator if the office of liquidator is vacant.

A

Official receiver

45
Q

The liquidator’s task comprises 3 parts :

A
  • recover the assets of the company for disposal
  • discharge the debts of the company
  • distribute surplus assets ( if any ) to the members
46
Q

Recover the assets of the company for disposal ( to raise cash )

A

All the property and legal rights to which the company is or appears to be entitled will come under the control of the liquidator or provisional liquidator.

47
Q

Recover the assets of the company for disposal ( to raise cash ) :

there are also several transactions which the liquidator has power to invalidate if the company had entered into them prior to the commencement of winding up. This enables the liquidator to

What are the several transactions?

A

Recover as many assets of the company as possible for distribution to the company’s investors and creditors.

  • Creation of a floating charge during insolvency
  • Recovery of excess value paid by the company in a sale
  • Recovery of excess value not paid to the company in a sale
48
Q

Creation of a floating charge during insolvency

A

S330
Any floating charge ( to secure existing debts ) created by the company on its own property within 6 months of the commencement of winding up is only valid if the company was solvent at that time

Regardless of any agreement with the charger/lender , any cash loaned to a company after the creation of and in consideration of a floating charge ( eg fresh debts ) is only repayable with a maximum interest of 5% per annum.
This prevents a lender , who gets involved in the last few months of the company’s life , from artificially inflating his total secured loan ( principal plus interest ) . An inflated total loan amount would otherwise entitle this lender to an unfairly large share from the proceeds of the sale of the charges assets.

49
Q

Recovery of excess value paid by the company in a sale

A

S331(1)
If the company buys any property , business or undertaking from certain sellers at an overvalue , the liquidator may recover any amount ( without reversing the transaction ) by which the cash consideration for the purchase exceeded the value of the property , business or undertaking.

50
Q

Recovery of excess value not paid to the company in a sale

A

S331(2)

If the company sells any property , business or undertaking to certain buyers at an undervalue , the liquidator may recover any amount ( without reversing the transaction ) by which the value of property , business or undertaking exceeded the cash consideration for the sale.
These buyers are a director or to a company whose directors included a director of the selling company. The transaction must have taken place within 2 years before the commencement of winding up.

51
Q

If the company is solvent , the creditors are paid in the following order:

A

A) unsecured creditors ( fixed chargers then floating charges )
B) preferential creditors
C) unsecured creditors
D) surplus ( If any ) paid among the members

52
Q

If the company is insolvent , the creditors are paid in this order

A

A) duly registered fixed chargees
B) preferential creditors , namely
- winding up costs of the liquidator
- salaries ( max as published by the minister in the Gazette)
- retrenchment benefits ( max as published by the minister in the gazette )
- CPF contributions for up to 12 months prior to the commencement of the winding up
- vacation pay leave
C) duly registered floating chargees ( which are valid under s300)
D) other preferential creditors , namely
- workmen’ compensation
- taxes
(E) unsecured creditors

53
Q

S328(3)

A

All creditors within the same rank are regarded as ranking equally. In the event that the company’s assets are insufficient to fully satisfy the debts owing in any class , the creditors in that class are to divide the available assets in equal proportions among them

54
Q

Distribute surplus assets ( if any ) to the members

A

Any surplus assets remaining after the full discharge of debts may be paid to ordinary shareholders in proportion to their shareholding or otherwise disposed off according to the provisions of the M&A of the company or a resolution of the members.

55
Q

What is dissolution

A

The action that brings a company’s existence to an end.

56
Q

Dissolution - voluntary winding up

The meeting must be called by ____ published in _____

A

As soon as the affairs of the company were fully wound up , the liquidator must make up an account to show how the winding up has been conducted and the property of the company disposed of.
He must then call for a final GM of the company ( in the case of a member’s voluntary winding up ) or a final meeting of the company and the creditors ( in the case of a creditors voluntary winding up ) to show the accounts and five any explanation of it .

The meeting must be called by advertisements published in four local daily newspapers in English Malay Chinese and Tamil languages at least one month before the meeting .

Within 7 days after the meeting , the liquidator must lodge with the Registrar and the Official Receiver a return of the holding of the meeting and of its date together with a copy of the accounts.

When 3 months after the lodging of the return have expired , the company shall be dissolved.

57
Q

Dissolution - compulsory winding up

A

After having realised the assets of the company and discharges all its debts and made a final return , if any to the contributories, the liquidator may apply to the Court for an order that he released and the company dissolved .

The company will be dissolved from the date of the order of dissolution.

58
Q

Dissolution - striking of defunct companies

A

S344

The Registrar has the power to commence striking off proceedings against a company which he has reasonable cause to believe is not carrying on business or is not in operation . Once struck off the register of companies , the company will be dissolved .

Company Law (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions