Chapter 9

Question 1

Judicial Management

Answer 1

A process where by an insolvent company may be revived under the protection of the Court and the law instead of being wound up. During the period of judicial management, the court may not take legal action against it for failure to pay its debts.

Question 2

Receivership

Answer 2

Situation where the property of the company is placed under control of a receiver so that it is preserved for the benefit of affected parties. Aim is to pay off creditors.

Question 3

Winding Up

Answer 3

Company ceases to exist. Every member becomes liable to contribute to the assets of the company.

Question 4

Voluntary Winding Up

Answer 4

• Initiated by the passing of a special resolution by its members
• If memorandum stipulates a time/event in occurrence of which the company is to be dissolved, ordinary resolution will do.

Question 5

Compulsory Winding Up

Answer 5

A winding up by the court is initiated by the presentation of a petition to the court for winding up of the company.

Question 6

Authorised Petitioners

Answer 6

-The company itself
-Any creditor
-A contributory
-Liquidator
-Judicial Manager
-A Minister
on following grounds
—members fall below 2
—illegal mlm
—company is used for unlawful purpose
—company has failed to lodge statutory report or hold statutory meeting

Question 7

Grounds for winding up by the court

Answer 7

• Company decides by a special resolution
• Company does not commence business within a year from its incorporation
• Directors have acted in their own interests
• Insolvency

Question 8

Unable to Pay its Debts

Answer 8

• Owes creditor more than $10 000
• Payment of that sum is already due
• Creditor has served the company notice and demanding them to pay the sum due
• Company has neglected to make payment 3 weeks after notice has been given

Question 9

Liquidation - Recover the assets of the company for disposal

Answer 9

All property and legal rights the company is entitled to will come under the liquidator.
-Transactions that the liquidator has the power to invalidate if the company has entered into them prior to winding up. This allows the liquidator to recover as many assets as possible for distribution.

Question 10

Liquidation - Recover the assets of the company for disposal - Creation of floating charge during insolvency

Answer 10

Any floating charge created within 6 months of commencement of winding up is only valid if the company is solvent.

Question 11

Liquidation - Recover the assets of the company for disposal - Recovery of express value paid by the company in a sale

Answer 11

If the company buys from certain sellers at overvalue, the liquidator may recover any amount by which the cash consideration exceeded the value.

Question 12

Liquidation - Recover the assets of the company for disposal - Recovery of express value not paid to the company in a sale

Answer 12

Can recover any value that is undervalue the product

Question 13

Liquidation - Discharge the Debts of the Company

Answer 13

Secured creditors have first priority in receiving payment of the moneys owed by a company out of the assets covered by their securities.

Secured creditors -> preferential creditors -> unsecured creditors -> surplus

Duly registered fixed chargees -> preferential creditors -> duly registered floating chargees -> other preferential creditors -> unsecured creditors