Chapter 7: Insolvency, Winding Up and Dissolution

Question 1

What is the key difference a member’s voluntary liquidation and a creditors’ voluntary liquidation?

Answer 1

Members’ - directors must be able to make a statement of solvency
Creditors’ - directors cannot make a statement of solvency.

Question 2

What is the function of the Gazette?

Answer 2

Publish notices

Question 3

When does compulsory liquidation occur?

Answer 3

When a court order is issued to wind up a company, usually because:

• a sum of £750 or more is owed and unpaid
• the company has failed to settle a debt
• a formal statutory demand has been served in respect of a debt which has not been paid.

Question 4

What steps are taken by the official receiver following their appointment in a compulsory liquidation?

Answer 4

• investigate assets and liabilities
• consider meetings of creditors and contributories
• consider appointing a liquidator
• wind up the company
• issue report to registrar

Question 5

What are the purposes of an administration order?

Answer 5

Court gives power to manage the business to an administrator to:
- rescue the business as a going concern, or obtain a better result for creditors than otherwise possible
-

Question 6

What are the powers of a holder of a floating charge under EA2002?

Answer 6

They may appoint an administrator out of court.

Question 7

When does administration end?

Answer 7

One year after commencement, or when the purpose has been achieved (if earlier)

Question 8

What is a corporate voluntary arrangement?

Answer 8

Agreement approved by the court for a company to reach a composition in satisfaction of its debts

Question 9

What process is required to approve a formal voluntary arrangement?

Answer 9

• nominee appointed to reach a composition
• two meetings convened: one for creditors, one for members.
• if approved by creditors, the arrangement is binding on all creditors entitled to receive notice of the meeting
• submission to court for approval

Question 10

What is the difference between a voluntary arrangement and voluntary liquidation?

Answer 10

In a voluntary liquidation the company is solvent.

Question 11

What is the role of a “receiver”?

Answer 11

Appointed to manage all or part of a company’s property.

Question 12

How is a receiver appointed?

Answer 12

Through a debenture or other instrument secured over the company’s property.

Question 13

What conditions must be be met for one of the directors if a company to apply for a voluntary striking off?

Answer 13

• not have changed names in last 3 months
• not undertaken any trading activities or disposed of assets in last 3 months
• only permitted activities in last 3 months must have been preparation for striking off
• must not be subject to insolvency procedures

Question 14

Which parties must be informed if directors of a company are seeking a voluntary striking off?

Answer 14

• creditors
• any directors who did not sign relevant form
• managers or trustees of pension scheme
• applicable VAT office

Question 15

What document must the company send for a voluntary striking off?

Answer 15

DS01

Question 16

Why might the register instigate the striking off of a company?

Answer 16

The registrar decided the business is defunct, since so returns have been made and/or the registered address is incorrect.

Question 17

What notification does the registrar give prior to striking off?

Answer 17

2 formal letters , each with 14 days notice to respond. A notice is published in the Gazette. If no objections in 2 months, the company will be struck off.

Question 18

Who is authorised to order the restoration of a company?

Answer 18

The Registrar or the courts

Question 19

What are the applicable timescales for restoration of a company?

Answer 19

Within 6 years of striking off for a application to the registrar.
Within 20 years for application to the courts

Question 20

Explain the procedure for administrative restoration.

Answer 20

• company must have been carrying on business at the time of striking off
• the Crown must consent if any property is bona vacantia
• the applicant has delivered all documents to bring the company records up to date

Question 21

What form must be completed for withdrawal of a striking off application?

Answer 21

DS02

Question 22

What are the grounds for seeking a disqualification order under CDDA 1986?

Answer 22

• persistent breach of company legislation
• failure to pay taxes
• fraud
• fraudulent/wrongful trading
• failure of directors to comply with provisions of IA 1986
• ## inappropriate conduct in entering transactions at an undervalue

Question 23

What action may be taken against a person who acts as a directors while disqualified?

Answer 23

The director is personally liable with the company for all the relevant debts of the company during the time he acted as a director.

Question 24

What are the purpose and powers of the IS?

Answer 24

Insolvency Service administers and investigates the affairs of individual bankrupts and insolvent companies, and the suspected misconduct of directors.

Question 25

What information may be obtained from IS?

Answer 25

Plain english guidance documents on liquidation and related matters.

Question 26

What practical advice and help can a company secretary provide directors in relation to a potential insolvency or dissolution of a company?

Answer 26

• provide checklists
• checking the disqualification status of directors
• advise on when to appoint an insolvency practitioner
• aid the insolvency practitioner if needed

Question 27

What information can be obtained from the Registrar and the Gazette in relation to insolvency and administration orders?

Answer 27

• information on proceedings brought against a company

- list of disqualified directors

Question 28

Who may appoint an administrator?

Answer 28

The court
The directors
A qualifying floating charge holder