Brainscape's Knowledge GenomeTM

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


See full index

Law > Chapter 10 - Insolvency law > Flashcards

Chapter 10 - Insolvency law Flashcards

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

What is the role of administration?

A

Rescue company as a going concern

If that fails, achieve better return for creditors than winding up

If neither, realise a company’s assets to make a distribution to 1+ preferential/secured creditors

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

How is an administrator appointed?

A

Director’s majority decision

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

How can the court appoint an administrator?

A

Must show company is unable to pay debts

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

How much notice needs to be given to a qualifying floating charge holder?

A

5 days

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

Can creditors apply to the court to appoint an administrator?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the duties of an administrator?

A

Must take control of company’s property and use powers to manage company in accordance with any proposals approved by creditors/court

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What must an administrator do within 7 days of taking office?

A

File notice of appointment with registrar

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How long do company officers and employees have to provide a statement of affairs?

A

11 days after request from administrator

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

What must an administrator do within 8 weeks of appointment?

A

Submit proposals for aim of achieving administration to registrar, creditors and members

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

Which party should administrators seek approval from regarding their proposals?

A

Creditors

Required to invite creditors to form a committee and ask for nominations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What powers does an administrator have?

A

Powers previously enjoyed by director

Can do anything necessary

Remove/appoint director

Call meetings of members/creditors

Apply to court for directions

Make payments to secured/unsecured creditors

Present/defend petition for company wind up

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

What can creditors/members do if they feel an administrator has acted in a way that has/will harmed them?

A

Apply to the court

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

When does a moratorium apply?

A

No resolution or court order to wind up company

No enforcement of fixed charges

No other legal proceedings

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

Can an administrator sell property subject to a floating charge?

A

Yes and without obtaining chargee’s consent

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

Can an administrator sell assets on hire purchase or subject to a fixed charge?

A

Yes with approval of court

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

What happens to a director’s powers during administration?

A

Powers suspended but remains in office

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

What happens to employees during administration?

A

Not automatically dismissed but can have contract terminated

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

What are the advantages of administration for the company?

A

Doesn’t necessarily cease to exist

Temporary relief from creditors

Breathing space to formulate rescue plan

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

What are the advantages of administration for members?

A

Continue to have shares

Business regenerated, enhancing value and restoring income

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

What are the advantages of administration for creditors?

A

Should obtain returns

Can apply to court for administration order

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

What are the 2 types of receiver?

A

Administrative

Fixed Charge

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

What is an administrative receiver?

A

Appointed by floating chargeholder

Power to:
- borrow
- take legal proceedings
- appoint pro advisers
- pay off creditors
-

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

Can holders of floating charges made after 15th September 2003 appoint administrative receivers?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is a fixed charge receiver?

A

Appointed by holder of a fixed charge over land if borrower deafults

Collects rent/sells property

Owe a duty of care to borrower

25
Q

What are the 2 kinds of Company Voluntary Arrangements (CVA)?

A

Composition of debts

Scheme of arrangement

26
Q

What is a composition of debts?

A

Company agrees to pay a limited proportion of total debt

27
Q

What is a scheme of arrangement?

A

Company agrees to pay its debts over a defined period (usually 3-5 years)

28
Q

What is the CVA process?

A

Ordinary resolution, calling for company to enter a CVA

Creditor approval of CVA required

If approved, becomes binding on all unsecured creditors

Approval must be reported to court

29
Q

How long does any creditor entitled to vote have to challenge the approval of CVA?

A

Within 28 days of court being notified of results of creditors/members meeting

30
Q

On what ground must a Creditor challenge a CVA?

A

Unfair prejudice or irregularity

31
Q

What happens once a CVA is approved?

A

Nominee acts as supervisor and implements CVA

32
Q

What can directors of small companies do to get more breathing space?

A

Apply for a short moratorium

Once prescribed docs have been submitted, moratorium of 28 days comes into effect, can be extended by 2 months

33
Q

What must a company do to illustrate to existence of a moratorium?

A

Advertise and state on all business docs

Notify registrar

34
Q

What are the effects of a moratorium?

A

No winding up or other insolvency methods

No security over company property

Floating charge cannot crystallise

Cannot hold a meeting without nominee/court consent

Can only sell property with nominee/creditors committee approval

Nominee must monitor company affairs

35
Q

How can members wind up a company?

A

Ordinary resolution where articles provide

Special resolution

36
Q

When is winding up deemed to have commenced?

A

When resolution passed

Must give notice in Gazette within 14 days

37
Q

Is it a criminal offence to make a false declaration of insolvency?

A

Yes, punishable by fine or imprisonment

38
Q

Who must a declaration be made by?

A

By all/majority of directors

39
Q

What is the timescale for a declaration to be made?

A

Not be made more than 5 weeks before resolution wind up is passed and delivered to Registrar within 15 days of meeting

40
Q

What is creditors’ winding up?

A

Directors unable to make declaration of insolvency but want to wind up voluntarily

Not initiated by creditors

Liquidator nominated by directors

41
Q

When must the date for the decision of creditors on nomination of liquidator be made?

A

3 working days following delivery of notice

Within 14 days of resolution to wind company up

42
Q

When must creditors be sent a statement of company’s affairs?

A

Within 7 working days of decision to wind up

43
Q

What are the disadvantages of creditor’s winding up compared to voluntary winding up?

A

Expensive
Time-consuming
Complicated

44
Q

When may a petition be brought up for compulsory winding up?

A

Company unable to pay debts

Just and equitable, only if company is solvent

45
Q

How can the BEIS trigger compulsory winding up?

A

Petition against a public company if trading certificate not acquired within 1 year of incorporation

Following investigation

46
Q

When is liquidation deemed to have commenced?

A

When petition was presented

Once commenced, any disposition of property/transfer of shares deems liquidation void

Any seizure of company assets after liquidation is void

47
Q

What happens to employees after liquidation?

A

Automatically dismissed

Liquidator assumes powers of directors

48
Q

What happens to floating charges after liquidation?

A

Crystallises

49
Q

What is the role of a liquidator?

A

Settle the list of contributories

Collect and realise company assets

Discharge company debts

Redistribute any surplus to contributories

50
Q

What happens once liquidation is complete?

A

Voluntary wind up - liquidator must prep account showing how wind up has been dealt with

Compulsory wind up - liquidator goes back to court which makes an order for dissolving

51
Q

What happens to charges not registered within 21 days?

A

Void against liquidators and creditors

52
Q

What happens to a floating charge created before winding up?

A

Void/voidable if created within 12 months or 2 years if given to a connected person

53
Q

What are the prescribed order in a compulsory winding up?

A
  • Costs - getting assets
  • Preferential debts - employee related costs
  • Secondary preferential creitors - HMRC
  • Floating charges
  • Unsecured ordinary creditors
  • Deferred debts
54
Q

How long is an administrator appointed for?

A

Terminated after 1 year unless extended by court or prescribed majority of creditors

55
Q

What is the primary role of a receiver?

A

To realise the charged assets and pay off the appointing charge holder’s debt

56
Q

Do creditors play a part in a members’ voluntary liquidation

A

No

57
Q

On a compulsory winding up of a company, who will the court usually appoint?

A

The official receiver

58
Q

When do the ‘ring-fencing’ provisions apply?

A

Only when distributable funds >£10k

Law (13 decks)

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