Chapter 19 - Winding Up & Company Dissolution Flashcards
What are the two types of winding up?
1) Voluntary winding up (special resolution of the members)
2) Compulsory winding up (court order)
What is meant by parri passu?
Funds are distributed rateably among creditors.
On what 2 grounds may the court make a winding up order?
- the company cannot pay its debts
- the court thinks it just and equitable that the company be wound up.
What is a retention of title clause?
A clause in a contract between a seller and buyer, stating that the ownership of the goods shall not pass to the buyer until payment is recieved.
Can a supplier rely on a retention of title clause in a supply contract to claim from a liquidator the proceeds of resale of goods it has supplied to the company but not been paid for?
Only if the goods have not been changed in some way (e.g. if they have been mixed with other materials into a new product.
Is property impressed with a trust available to a liquidator for distribution?
No, as the property is not owned by the company.
What is the statutory order of distribution on a winding up?
1) Fixed charges
2) Retention of title clauses
3) Expenses of liquidation
4) Preferential debts pari passu
5) Debts secured by floating charges put in place before 15 Sep 2003
6) Prescribed part of the proceeds for post-2003 floating charges (for secured creditors)
7) Debts secured by floating charges post-Sep 2003.
8) Ordinary unsecured creditors pari passu
9) Deferred creditors
10) Members
How is the “prescribed part” calculated?
- 50% of the first £10,000
- 20% of any assets exceeding £10,000
- not exceeding £600,000
When does a company cease to exist?
By removal of its name from the register at Companies House
Identify 9 situations resulting in the removal of the name of a company from the register.
- striking off the register if the company has ceased business
- automatically, 3 months after a compulsory winding uo
- automatically, three months after an application of the liquidator
- on completion of administration
- by order of the court
- pursuant to an act of parliament.
Why might it be appropriate for a company to be restored to the register?
To enable legal procedures against the company, for example for damages for death or personal injury to be brought.
What is the effect of a court order for restoration?
The company is deemed to have continued in existence as if it had not been struck off.
What is the effect of a court order for restoration?
The company is deemed to have continued in existence as if it had not been struck off.
What is a prohibited name for the purpose of IA 1986 s 216?
A name so similar to the name by which an insolvent company was known as to suggest an association with the insolvent company.
What are the consequences of a contravention of s 216?
A person contravening s 216 may be criminally liable and may be imprisoned or fined or both.
To what situation is the term Phoenix syndrome applied?
The setting up of a company with a similar name and running essentially the same business as an insolvent company, thereby exploiting the privileges of limited liability.
What are the 4 challengable pre-liquidation transactions?
1 Transactions at an undervalue (s 238 IA)
2 Preferences (s 239)
3 Invalid floating charges (245)
4 Extortionate credit transactions (244)
What is a TUV?
A transaction at an undervalue i.e. where:
- the company receives no consideration (a gift)
- the company enters a transaction at significantly less than moneys-worth