Insolvency Flashcards
1
Q
what are the 2 main insolvency tests?
A
- Company is unable to pay its debts as they fall due (cash flow test)
- Has liabilities greater than its assets (balance sheet test)
2
Q
what are the two grounds needed for liquidation?
A
- unable to pay debts.
- just and equitable to wind up.
3
Q
how can shareholders voluntarily wind up a company?
A
special resolution to place the company into CVL and an ordinary resolution to appoint a nominated liquidator.
4
Q
what is a pre-solvency moratorium?
A
period which creditors are unable to take action to exercise their usual rights and remedies.
- last for 20 business days, can be extended by a director for a further 20 business days.
- max period is one year.
5
Q
what is a company voluntary arrangement?
A
- creditors agree to part payment of debts owed to them.
- directors draft a CVA proposal and appoint a nominee.
- nominee reports to court within 28 days.
- creditors vote on proposal within 14 days.
- approved if at least 75% in value vote in favour.
- will be invalid if those voting against the CVA include more than half of the total creditors unconnected to the company.
6
Q
how can an administrator be appointment if there is a qualifying floating charge holder?
A
- director file a notice of intention to court and on the QFCH.
- wait 5 business days.
- appoint and file notice of appointment.
7
Q
what is the statutory order of priority?
A
- Liquidator’s fees and expenses.
- Amount due to fixed charge creditor.
- Liquidiators remuneration and other costs.
- Preferential creditors (employees then HMRC)
- Creation of prescribed part fund.
- floating charge holders.
- unsecured creditors.
- shareholders.
8
Q
how to apply for bankruptcy?
A
- debtor is unable/no reasonable prospect to pay its petition debts.
- debt must be for a liquidated sum exceeding £5000, unsecured, and the debt must be domiciled in England and Wales.
