Corporate Insolvency

Question 1

overall objectives

Answer 1

To facilitate the survival of a failing business; or

To allow for the effective distribution of its assets to stakeholders

Question 2

insolvency options for companies

Answer 2

Compromise with creditors – ss227-243

Receivership by secured creditors – RA 1993

Liquidation – CA ss240-316B

Statutory management – CIMA 1989

Voluntary administration – CA pt15A

Question 3

voluntary administration purpose

Answer 3

Maximises the chances of the company continuing in existence

If it’s not possible to continue in existence, results in better return

Question 4

statutory management purpose

Answer 4

used in extreme cases where company’s position has deteriorated significantly, provides for prompt action to protect interested persons/public

Question 5

forms and requirements of compromise with creditors

Answer 5

Cancelling/reducing company debt

varying creditor rights or debt terms

altering the company’s constitution to assist debt payment

Requires 75% majority vote by creditors