Chapter 21 Flashcards
How can a company avail themselves when in financial difficulty?
- Voluntary arrangements
- Administration
- Liquidation
Give the key reasons as to why a company would need to restructure
- Management of commercial risk
- Different financial requirements for different parts
- Preparation for the sale of part of a business
- Disagreement
- Improvement in share value
- Separation of division
- Rearrangement of subsidiaries
- Tax
When does a reconstruction occur?
Where all or part of undertaking of a company is transferred to another person
Is there a single tax code applicable to restructuring? If so what is it?
No there isn’t
What is an amalgamation? is there a continuity or discontinuity of shareholder interest?
The reverse of a reconstruction - involves bring together 2 or more undertakings of separate companies
A TAKEOVER of one company by another is a form of amalgamation
Amalgamation requires a continuity of shareholder interest
When does a partition occur?
It is the opposite of a reconstruction
Where a company is divided between two or more shareholders so that there is, after the transaction, no substantial identity of shareholders in relation to each part of the undertaking
Can also be effected by employing Part 26 Companies Act 2006
What does it mean for a company to go into administration?
It is a procedure under the Insolvency Act 1986 which is aimed at companies in financial difficulty
Designed to rescue such a company
Administration ends automatically after 12 months - although can be extended indefinitely by court
What are the 3 objectives of an administrator?
Primary obj: Rescue the company as a going concern
Secondary obj: Achieve a more advantageous realisation of the company’s assets
Tertiary obj: realise the company’s property so as to make a distribution to one or more secured or preferential creditors
Do directors run the company when under administration?
No, the administrators run the company
What’s another way of saying a company is going into liquidation?
A company is winding up
What’s another way of saying a company is dissolved?
When a company has finished winding up
What is the job of a liquidator?
Their task is to ascertain the company’s assets and liabilities, converting the assets into cash (realising them), paying off creditors and distribute remaining surplus cash to shareholders
When a liquidator is appointed - they also become the beneficial owner of the company’s assets
What are the 3 types of liquidation?
- Compulsory liquidation - where court orders a company to be wound up
- Members’ voluntary liquidation (MVL) - where a solvent company holds a general meeting and the shareholders vote to wind up the company
- Creditors’ voluntary liquidation (CVL) - where an insolvent company holds a general meeting and the shareholders vote to wind up the company
List the order in which assets will be realised in a company
- Costs of getting in the assets, paying the liquidator’s remuneration & incidental costs of liquidation procedure
- Preferential creditors
- Secured creditors with floating charge
- Unsecured creditors
- Shareholders according to their rights under the Articles
How can a company be restored?
By an application within 6 years made by a former director / shareholder
Can a company apply for the company to be struck off the register without appointing a liquidator?
Yes
