Chapter 10 - Asset protection regime in liquidation

Question 1

Between presentation of petition and the granting of winding up order - can creditors continue to take take action against company.

Answer 1

Yes

Between presentation of petition and the granting of winding up order - there is no automatic stay of legal proceedings so creditors can continue to take action against company.

but S126 allows the company, any creditor or contributory to apply to court for an order to stay or restrain proceedings.

Question 2

S126 in a compulsory liquidation

Answer 2

Actions or proceedings against the insolvent company

Between presentation of petition and the granting of winding up order - there is no automatic stay of legal proceedings so creditors can continue to take action against company.

S126 allows the company, any creditor or contributory to apply to court for an order to stay or restrain proceedings.

Question 3

S130 in compulsory liquidation

Answer 3

Actions or proceedings against the insolvent company

Post winding up S130 provides that once a winding up order has been made then no action or proceedings can be proceeded with or commenced against the company.

Question 4

Do S126 and S130 apply in voluntary liquidations

Answer 4

No

Actions may be commenced or continued with (including petitions for winding up)

However a liquidator (or creditor or contributory) may apply to court under S112 for proceedings to be stayed.

Question 5

What is execution?

Answer 5

Execution - creditor of company is seeking to use enforcement mechanism of the court to obtain repayment of a debt in respect of which judgement has been obtained

Question 6

Name three types of execution

Answer 6

Third party debt orders - compels 3rd parties that are holding funds for the debtor (eg the bank) to pay them over to the judgement creditor

Writ of control (bailiffs) - warrant of execution against goods, enforcement officer is instructed to seize and sell debtors goods

Charging order - securing a judgement by imposing a charge over the debtors interest in (usually) land. To realise charge creditor must obtain an order for sale.

Question 7

S128 Compulsory liquidation - is attachment or execution put in force against the company after winding up void

Does it apply in voluntary liquidations

Answer 7

Yes

No

Question 8

S183 in compulsory liquidations - if creditor completes execution prior to commencement of liquidation can they retain the benefit of execution?

If it is not completed, are they allowed to retain any goods seized?

Answer 8

Yes - any execution completed before liquidation are valid

No - liquidation may require them to hand over such assets

Question 9

Compulsory liquidation effect of S184 on court enforcement officers

Answer 9

When notice is served on CEO that PL is appointed or WUO has been made, the CEO must deliver any goods/money seized to the liquidator, less their costs.

When an execution is levied in respect of a judgment exceeding £500, the CEO must retain the proceeds for 14 days. If within this period the CEO is notified of petition, he must pay proceeds (less costs) to liquidator on making of WUO

Question 10

When must an execution be completed in a voluntary liquidation?

Answer 10

Before the members resolution to wind up.

Question 11

Does Commercial Rent Arrears Recovery (CRAR) needs a court order?

What does it allow landlords to do?

Answer 11

CRAR does not need a court order.

New procedure for recovery of unpaid rent by seizure of goods.

Question 12

Is CRAR (Commercial Rent Arrears Recovery) available to landlords once a winding up order has been made?

Answer 12

No

S128 provides that there a winding up order is make CRAR put in force after commencement is void. Landlords cannot therefore validly exercise CRAR for arrears of rent after the date of petition.

Question 13

What are the consequences of CRAR (Commercial Rent Arrears Recovery) if it has occurred 3 months prior to the winding up order?

Answer 13

S176 the goods/sale proceeds are charged for the benefit of the company.
but only to cover any remaining preferential debts that aren’t covered by the company’s remaining property.

Landlord claim is then preferential

Question 14

Is there any restriction on CRAR in a voluntary liquidaiton?

Answer 14

No, S128 and S176 do not apply.

However liquidator may be able to persuade the landlord to hold off action or he could apply to court under S122 to restrain the action.

Question 15

What is S127?

Answer 15

Dispositions of the company’s property made after the date of petition are void unless the court orders otherwise.

Post petition transfer of shares or alterations in a members status are also void.

S127 does not apply in voluntary liquidations.

Question 16

How would a Retention of Title (ROT) be legally binding?

Answer 16

It must be incorporated into the contract and be validly worded.

Both supplier and buyer must have known of its existence at the time contract was made, cant for example be on the invoice.

Question 17

What at the two types of Retention of Title?

Answer 17

A simple clause - operates to prevent ownership of specific goods passing until payment is received for those specific goods.

An all-monies clause - retains ownership of goods until all outstanding sums due to supplier are paid.

Question 18

In a retention of title, who is the onus on to identify the goods?

Answer 18

The claimant, not the liquidator.

Goods must be identifiable and not incorporated fully into other goods. Items that can be easily removed from goods are not deemed as incorporated. But if leather has been made into a bag, it is incorporated and ROT claim will fail.

Question 19

Effects of liquidation on suppliers right to enforce an ROT

Answer 19

If ROT gives right to enter premises to repossess goods then creditor can enter property to exercise this right.

Compulsory - proceedings by creditor will be prevented pursuant to S130

In voluntary liquidation there is no automatic prevention, it will be for the liquidator to take steps to restrain the proceedings.

Question 20

What is the effect of a disclaimer?

Answer 20

A disclaimer discharges an insolvent company from all further liability in respect of the property concerned.

Question 21

If a liquidator disclaims a lease, what are the timelines for notifying interested parties?

Answer 21

Once liquidator prepares notice of disclaimer, must send to interested parties within 7 business days.

Question 22

S178 allows any person interested in property of the company (eg landlord) to apply in writing to landlord requiring him to decide whether or not to disclaim, how long does liquidator have to respond?

Answer 22

28 days from receipt of notice to disclaim the property.

If they fail to disclaim, then they no longer can and are deemed to have adopted any contract. Any sums due in respect of the contract are now payable as expense in liquidation.