Chapter 8 - Compulsory Liquidations Flashcards
What are the grounds for winding up a company by court?
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
Name the four ways an inability to pay debts can be shown
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
Can the supervisor of a CVA petition for a winding up?
Yes
Will be treated as if presented by contributories
Can an administration turn into a compulsory liquidation, and an Administrative Receiver
Yes
Petition must be presented in the name of the company
When would a provisional liquidator be appointed
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
Compulsory liquidation - What is the usual function of a provisional liquidator?
When does appointment terminate?
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.
Where must a winding up petition be served and within what time frame before the hearing?
Company’s registered office
On any voluntary liquidator, administrator or supervisor of CVA
Must be served at least 14 days before the hearing
What are time frames for advertising a petition for winding up?
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
When must a certificate of appliance for a petition be filed?
5 business days before hearing a certificate of compliance must be filed at court
Can a petitioning creditor withdraw petition?
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.
If the debtor company wishes to oppose a petition, what time frame must they do it in?
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.
Can court action or proceedings be continued or commenced against a company once a winding up order has been made?
No
What is a special manager?
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
WUC
Two reasons that OR would not retain the liquidation and would pass it to a private IP
- 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
What are the two methods that OR can pass on liquidation to private IP
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.
