Company Finance and Insolvency

Question 1

True or false, only a public company may amend its articles of association to incorporate a provision excluding the statutory rights of pre-emption?

Answer 1

False, only a private company may do this

Question 2

Is an authority to allot shares given by ordinary resolution sufficient?

Answer 2

Yes. Authority may be given either in the articles or by ordinary resolution.

Question 3

What is the minimum amount of cash that a public limited company must call in immediately when they issue shares to someone?

Answer 3

100% of the share premium and 25% of the nominal share value

Question 4

What must happen to goods if they are exchanged for shares in a plc?

Answer 4

They must be independently valued six months before allotment and received within five years of allotment.

Question 5

True or false, a public company must obtain an independent valuation for non-cash consideration for its shares from its auditor.

Answer 5

True

Question 6

What are examples of undistributable reserves for a plc?

Answer 6

They include the share premium account, capital redemption reserve, revaluation reserve and any other reserve specified in the articles or statute.

Question 7

What does a creditor have to do to be able to petition a court for a compulsory winding up?

Answer 7

Be owed >£750 and have given a written demand that has not been satisfied within 21 days

Question 8

In bankruptcy, are employee debts (ie their salaries) or unsecured debts paid first by a trustee!

Answer 8

Employee debts

Question 9

With what do the statutory rights of pre-emption apply?

Answer 9

The allotment of equity securities for cash

Question 10

What are pre-emption rights?

Answer 10

They give existing shareholders first refusal when a company is issuing new shares.

Question 11

What is a debenture?

Answer 11

The document with written acknowledgement of the terms of a loan on it - whether secured or unsecured

Question 12

What is a “company charge”?

Answer 12

Something used to secure a loan, like the company version of a house in a mortgage deal

Question 13

If a company charge has not been registered, within the prescribed period laid down by the companies act 2006, what happens?

Answer 13

The charge is void against any liquidator, administrator or creditor

Question 14

Within how many days must an administrator make his requirements for statements from a company’s employees known to them?

Answer 14

7 days

Question 15

How many days do officers and employees have to comply with an administrator’s request?

Answer 15

11 days

Question 16

Generally speaking, an administrator has all the powers of the directors in addition to some specific powers conferred by the insolvency act 1986

Therefore can petition to wind up a company and can remove a director and replace them

Answer 16

-

Question 17

True or false, a company voluntary arrangement once approved becomes binding on all creditors

Answer 17

What is the normal duration of a company voluntary arrangement?

Question 18

Can you submit a petition to court for the winding up of a company immediately if you are owed >£750?

Answer 18

No, you must have also served a written demand on the company at its registered office and the company must have failed to pay it - or offer reasonable security for it) within 21 days

Question 19

True of false, you must provide additional evidence to satisfy a court that a company is unable to pay their debts etc if you have submitted a winding up petition properly

Answer 19

False, if you have submitted the petition properly then you will have already waited 21 days for the company to pay you your debt and they have failed to pay it

Question 20

How much does the creditor of an individual have to be owed to petition for their bankruptcy?

Answer 20

£5000

Question 21

In what circumstances would a court be likely to refuse a bankruptcy order made by the individual and order a report to be made with a view to achieving a suitable IVA?

Answer 21

Debts are less than £40k

The debtors estate is worth more than £4K and the debtor has not been made bankrupt or entered into a scheme with their creditors in the previous five years

This does NOT APPLY if it is the individual’s creditor that is making the petition for bankruptcy

Question 22

True or false, an individual subject to an IVA can still act as a director of a company?

Answer 22

True

Question 23

After how long are bankruptcy orders discharged?

Answer 23

One year

Question 24

If I owed Cammie £10 and she said she’d accept a cheque then if I were to offer £8.50 cash instead? Would that constitute a valid consideration?

Answer 24

No

Question 25

Can a director be liable for a breach of competition law if they were not aware of the breach?

Answer 25

Yes, they can be liable if they should have known about the breach

Question 26

What is wrongful trading?

Answer 26

It is trading which directors do when they know that the company is insolvent.

Question 27

Can directors be found guilty of wrongful trading if a company has not been wound up?

Answer 27

No

Question 28

If a director is given authority to allot shares, they are given an expiry date by which the shares should be allotted, when is the expiry date?

Does this authority require an ordinary or special resolution to be altered by?

Answer 28

Within 5 years of be authority being conferred

Ordinary

Question 29

With statutory rights of pre-emotion for shareholders, what is the time period during which the offer of shares may be accepted?

Answer 29

21 days

Question 30

Can you pay for shares in goodwill?

Answer 30

Yes

Question 31

When a special resolution is passed in support of the redemption of shares by what timescale must payment for the shares be made following the resolution?

Answer 31

Between 5 and 7 weeks

Question 32

If both parties do a charge agree that it shall be a floating charge and describe it as such, could the charge still be a fixed charge nonetheless?

Answer 32

Yes

Question 33

Who, out of the company, the directors, a secured credit with a fixed charge and a secured creditor with a floating charge can apply to a court for the appointment of an administrator?

Answer 33

All of them

Question 34

Can a secured creditor with a fixed charge appoint an administrator out of court?

Answer 34

No

Question 35

Generally speaking, at the very least, an administrator has all the powers of the directors.

Answer 35

-

Question 36

If the shareholders of a company approve a proposed company voluntary arrangement and the creditors of the company oppose it, who will prevail?

Answer 36

The creditors

Question 37

On what grounds may a creditor challenge the approval of a company voluntary arrangement?

Answer 37

Some material irregularity

Question 38

Liquidators can reverse preference share allocation if allocated within how long of the company going into liquidation?

For people connected with the company

For persons not connected with the company

Answer 38

Connected to the company - two years prior to insolvency

Not connected - six months prior to insolvency

Question 39

Once an individual voluntary arrangement has been approved, a creditor may not bring a petition for bankruptcy - true or false?

Answer 39

False