Chapter 6 - Legislation Flashcards
What is noted under Insolvency Act 1986, s 72A?
Holders of qualified floating charges registered on or after 15 Sep 03 were prohibited from appointing administrative receivers - Insolvency Act 1986, s 72A.(Banks can still apoint administrative receivers for floating charges registered before then)
What is the purpose of Administration?
Insolvency Act 1986, Sch B1, Para 3:
The administrator must perform his function (in the interests of the creditors as a whole) with the objective of -
a) Rescuing the company as a going concern; or
b) Achieving a better results for the companys’ creditors as a whole than would be likely if the company were wound up without first being in administration; or
c) Realising property in order to make a distribution to one or more secured or preferential creditors.
What is meant by “Company Liquidation”?
Winding up/Liquidating is the process by which the assets of the company are collected in and realised, its liabilities discharges and the net surplus, if there is one, distributed. The process can be either voluntary or compulsory (by Court).
What is the role of a Liquidator?
The basic duty of a liquidator is to collect and realise the assets of the company.
The order of distribution of assets held by the liquidator following the CA 2006 amendments are:
1) Expenses of winding up (but excluding litigation costs)
2) Preferential debts (inclusive of employees’ salaries)
3) Floating charge holders
4) Unsecured creditors + Prescribed part
5) Shareholders
What is noted under IA 1986, s 214?
Court can order director/directors responsible to make a contribution to the fund if they were found to have carried out wrongful trading after they know or ought to have known that the company would be insolvent.
IA 1986, s 214(4) provides that the facts which a director of a company ought to know or ascertain, etc, are those which would be known or ascertained by a reasonably diligent person having both -
a) The general knowledge, skill and experience that may reasonably be expected of a person carrying out the same function as are carried out by that director in relation to the company; and
b) The general knowledge, skill and experience that the director has.
What is noted under IA 1986, s 212?
Liquidators or creditors may apply to the court if they believe that a director is guilty of misfeasance. If the Court agrees, can force director to restore money or property to the company.
What is noted under IA 1986, s 238?
Transactions at an undervalue
This section covers companies that: -
- Are in administration or liquidation;
- Entered into a transaction at an undervalue with any person for consideration which is significantly less thn the value of the consideration provided by the company;
- Such transaction is within the period of two years ending with the onset of insolvency;
- Such transactions are made at a time when the company was unable to pay its debts or becomes unable to pay its debts in consequence of the transaction;
Court can order that such transactions be reversed.
No order shall be given if the company entered into the transaction in good faith and for the purpose of carrying on its business, and at the time there were reasonable grounds for believing that the transaction would benefit the company.
What is noted under IA 1986, s 239?
Preferences
Conditions to be satisfied in order to consider that a transaction has been carried out with prejudice (giving preference to somebody - like unsecured creditors):
- For the purpose of this setion and section 241, a company gives a preference to a person if -
- that person is one of the company’s creditors or a surety or guarantor for any of the company’s debts or other liabilities and
- the company does anything or suffers anything to be done which (in either case) has the effect of puting that person into a position which, in the event of the company going into insolvent liquidation, will be better than the position he would have been in if that thing had not been done.
Can a director be disqualified?
Yes.
