Chapter 21 Insolvency and Administration

Question 1

What is liquidation?

Answer 1

Liquidation means the company must be dissolved and its affairs ‘wound up’, the assets are realised, liabilities are paid and any surplus returned to members

Question 2

What are the three different methods of liquidation?

Answer 2

1)Compulsory
2)Members’ voluntary
3)Creditors’ voluntary

Question 3

Compulsory and creditors’ voluntary liquidation are proceedings for insolvent or solvent companies?

Answer 3

For insolvent companies

Question 4

Members’ voluntary liquidation is for?

Answer 4

Solvent companies

Question 5

Name the parties who are more likely to be involved in the decision of liquidation?

Answer 5

The directors
The creditors
The members

Question 6

What are the two different types of winding up that a voluntary winding up can lead to?

Answer 6

1)Members’ voluntary winding up (if the co. is solvent)
2)Creditors’ voluntary winding up (if the co. is insolvent)

Question 7

What is the role of liquidator?

Answer 7

A liquidator is an authorised, qualified insolvency practitioner whose main role is to wind up the company

Question 8

What is the statutory duty of a liquidator?

Answer 8

To report to the secretary of state where they feel that any director of the insolvent company is unfit to be involved in the management of a company

Question 9

What are the common features of liquidation?

Answer 9

1)No share dealings or changes in members are allowed
2)All company documents and websites must state that the company is in liquidation
3)The directors’ power to manage ceases

Question 10

Within how many months after the commencement of liquidation, the liquidator must call a meeting?

Answer 10

Within 3 months

Question 11

What is necessary for members’ voluntary winding up?

Answer 11

It is necessary that the directors make and deliver a declaration of solvency to the registrar

Question 12

What happen if no declaration of solvency is made and delivered to registrar?

Answer 12

The liquidation proceeds as a creditor voluntary winding up even if, in the end, the company pays its debts in full

Question 13

When do government may petition for the compulsory winding up of a company?

Answer 13

1)If a company has not obtained trading certificate within one year of incorporation
2)Following a report of government inspectors that it is in public interest and just and equitable to be wound up

Question 14

Administrator can also apply for a company’s compulsory liquidation.

Answer 14

Yes, on behalf of a company, as a means of ending an administration process

Question 15

If the petition for compulsory liquidation is presented by a member what they must need to show?

Answer 15

1)The company is insolvent
2)They have been a registered shareholder for at least 6 months up to the date of their petition

Question 16

How many weeks the official receiver have to decide whether or not to convene separate meetings of creditors and contributories?

Answer 16

12 Weeks

Question 17

What is the prescribed order for distributing the company’s assets?

Answer 17

1)Costs(of selling the assets, liquidator’s pay and other liquidation expenses)
2)Preferential debts
3)Debts secured by floating charges
3)Debts owed to unsecured ordinary creditors
4)deferred debts
5)Members

Question 18

What are the differences between compulsory and voluntary liquidation?

Answer 18

1)Control
2)Timing
3)Liquidator
4)Legal proceedings

Question 19

What is an administration?

Answer 19

A method of saving a company from liquidation

Question 20

Why an administrator is appointed?

Answer 20

To try to rescue the company as a going concern

Question 21

Who can appoint an administrator without a court order?

Answer 21

1)Floating chargeholders
2)Directors
3)Company(members)

Question 22

When do a court will grant an administration order?

Answer 22

If it is satisfied that the company is unable to pay its debts and the administration order reasonably likely to achieve the purpose of administration

Question 23

Within how many days of appointment an administrator must send notice of appointment to registrar?

Answer 23

Within 7 days

Question 24

What is the period of time within which the administrator must state their proposals for achieving the aim of administration to registrar, members or directors?

Answer 24

Within 8 weeks

Question 25

Is it possible that the administrator without creditors’ consent make any substantial amendment to the proposal?

Answer 25

No gaining creditors’ consent is very important

Question 26

The administrator usually requires the permission of the court to make payments to unsecured creditors?

Answer 26

True

Question 27

What is the period of time for which an administration can last for?

Answer 27

12 months