Chapter 8 - Compulsory Liquidations

Question 1

What are the grounds for winding up a company by court?

Answer 1

S122(1)
- Special resolution to wind up compulsory if members believe management need investigating
-PLC does not have trading certificate, 12 months past since incorporation
- is an old public company
-suspends business for a year
-unable to pay debts
- moratorium come to end and no voluntary arrangement has been approved
- court decides it is just and equitable eg purpose of business failed, deadlock in management, company formed to carry out illegitimate business

Question 2

Name the four ways an inability to pay debts can be shown

Answer 2

1 Unsatisfied statutory demand
2 Unsatisfied judgement execution
3 Unable to pay debts as fall due ‘ commercial insolvency test’ or ‘cash flow test’
4 Balance sheet test - assets less than liabilities

Question 3

Can the supervisor of a CVA petition for a winding up?

Answer 3

Yes
Will be treated as if presented by contributories

Question 4

Can an administration or an AR turn into a compulsory liquidation?

Answer 4

Yes
Petition must be presented in the name of the company

Question 5

When would a provisional liquidator be appointed

Answer 5

If applicant can show that the assets of the company are in jeopardy and that unless PL is appointed there is a real fear that the assets of the company will not be available for distribution

Question 6

Compulsory liquidation - What is the usual function of a provisional liquidator?
When does appointment terminate?

Answer 6

to preserve the assets and records of the company until the hearing of the petition

Terminates upon making of the winding up order

No proceedings can be commenced or continued against company without permission of court.

Question 7

Where must a winding up petition be served and within what time frame before the hearing?

Answer 7

Company’s registered office

On any voluntary liquidator, administrator or supervisor of CVA

Must be served at least 14 days before the hearing

Question 8

What are time frames for advertising a petition for winding up?

Answer 8

Petition must be advertise in gazette not less than seven business days after it has been served on company

and not less than 7 business days before the day fixed for the hearing

Question 9

When must a certificate of appliance for a petition be filed?

Answer 9

5 business days before hearing a certificate of compliance must be filed at court

Question 10

Can a petitioning creditor withdraw petition?

Answer 10

With consent of the court, up to 5 business days before hearing. Permission to withdraw will not be given if petition has already been advertised.

Question 11

If the debtor company wishes to oppose a petition, what time frame must they do it in?

Answer 11

If the debtor company wishes to oppose the petition it must file the relevant evidence in support of its opposition not less than 5 business days before the hearing.

Question 12

Can court action or proceedings be continued or commenced against a company once a winding up order has been made?

Answer 12

No

Question 13

WUC - within what timeframe must the OR advertise the order?

Answer 13

As soon as reasonably practicable

Question 14

What is a special manager?

Answer 14

Can be appointed once company in liquidator where it appears nature of business or interest of creditors require appointment of another person to manage the company’s business.

Special manager must give security and prepare R&P every 3 months for liquidators approval

Remuneration fixed by court

Question 15

WUC
Two reasons that OR would not retain the liquidation and would pass it to a private IP

Answer 15

• Liquidation requires specialist skills/knowledge/resources of IP
• over 50% of ordinary secured creditors wish a private IP to be appointed. This request will be refused if:
  a - all creditors will be paid in full
  b - no evidence IP would succeed in discovering further assets

Question 16

What are the two methods that OR can pass on liquidation to private IP

Answer 16

Apply Secretary of State under S137 (can be done at any time)

To see nomination of liquidator from creditor, OR has 12 weeks from WUO to decide whether to seek a nomination.

Question 17

WUC
If OR decides not to see nomination for liquidator, how many creditors can requisition that the OR seek nominations?

Answer 17

S136
25% by value of creditors can requisition the OR to see nominations for post of liquidator

Question 18

S136
WUC OR sends notices inviting proposals for a liquidator, when must the OR receive the proposals by?

Answer 18

OR must received proposals within 5 business date of the date of the notice

Question 19

WUC
OR sends notices for proposal of liquidator, there is more than one nomination therefore a decision procedure must be held.
When must it be held by?

Answer 19

within 4 months of winding up order and no more than 21 days from the time limit for submitting nominations for a liquidator.
Creditors and contributories must have at least 14 days notice of the decision date.

Question 20

What is the ORs general fee (Secretary of State fee)?

Answer 20

£6,000

Where OR is acting as trustee, the OR is entitled to 15% or asset realisations (the OR admin fee)