Corporate insolvancy Flashcards
What is liquidation
This is winding up a company. Company ceases to exist
What does a liquidator do
Collects assets reviews transaction and distributes assets in order to creditors
What happens to the directors powers during liquidation
They cease to exist but director remains in office. Can be removed by administrator
When does liquidation end
When assets are sold, money is distributed, liquidator money released, accounts forwarded to CH and the court.
Three months later CH dissolves company
Three types of liquidation
Voluntary
Members voluntary
Compulsory
Voluntary liquidation
Directors volunteer this
Members voluntary liquidations
Only available to solvent companies
Director must swear a declaration of solvency and is offence to lie
Compulsory liquidation
Petition at court must prove insolvency
Official receiver will become liquidator or creditors may appoint one
Directors are terminated
What is a company voluntary agreement
When the company agrees with the creditors to pay less than full amount owed
What happens during administration
An independent insolvancy practitioner runs, reorganised or possibly sells a company in financial difficulties
How does administration end
After one year or by administrator
What are the two types of administration
In court route or out of court route
Process for out of court administration
Appointment by directors
Notify QFCH, court and lenders who are entitled to appoint administrator
Director must declare that company cannot pay debts, is not in liquidation and no administration in the past
When will a court order administration
Company is unlikely to be able to pay its debts
Administration is likely to provide a better result to company’s creditors
Once an applicant has applied to court for administration what must they do next
Notify anyone who has appointed an administrative receiver
Notify any qualified floating charge holder entitled to appoint
Notify any other persons as may be prescribed
