Insolvency Flashcards
What are the basic objectives of insolvency law in regards to the specifically bankruptcy of individuals
To protect the insolvent from harrasment from creditors, To enable a fresh start in the case of less blame worthy cases and to reduce the indebtedness with regards to circumstances and family
What are the basic objectives of insolvency law in regards to specifically coorporate insolvency
To perserve the business or salvagable parts of it (but not nececarially the company), and to impose personal liability if it is deemed that limited liability has been abused
What are some general objectives of insolvency law
To ensure that all creditors participate on equal footing and act fairly although statuatory creditors have priority, to impartially investigate the circumstance and make sure that mesures taken are in the interest of society and to recover any assets improperly dealt with
what is pari passu
That equal creditors should be on equal footing
It is illegual for people to make a contract where they promise to transferr ownership of specific property to a specific creditor in the case of bankrupcy
Yes, that would be against parri passu
What is balance sheet insolvency
if a persons assets are lesser than their liabilities
What is commercial insolvency
A cash/liquidity shortage sever enough not to be able to repay debts
What is ultimate insolvency
The result if a persons assets have been ceased and the creditors have not aquired all they want
What is considered insolvent under the Sale of Goods act 1979
The inability to pay creditors when a payment becomes due
What is a country court administration order
A court representative may oversee the payment of a debt less than 5000£ if an individual is insolvent
In the case of individual insolvency an individual volentary arrangement (IVA) may be overseen by the court
True
What is DRO
A debt relief order, when a person is less the 20000£ in debt, has less than 1000£ in assets and a disposable income smaller than 50£ a month and has not been insolvent for a year their debt may be forgiven by the government
What is a bankruptcy application
A person may declare themselves bankrupt online or a creditor may take the case to court, declaring the person as insolvent
A bankruptcy order cannot be made for a person in less than 5000£ in debt
true
If a person can repay their debt in less than 3 weeks after a bankruptcy order they will no longer be benkrupt
True
Employees have priority as creditors
True
An insolvent individual has no right to books, furniture or housing required for the survival of their family
False
An insolvent individual cannnot be a company director and have limited ability to take out credit
True
An individual insolvent is usually bankrupt for 3 years after which all debts are considered resolved
True
What is a CVA in corporate bankrupcy
A corporate volentary arrangement where an insolvent company and their creditors come to an arangement, only available for small companies that are not insurance companies or banks as per the 1985 companies act
What are the objectives of an administration in corporate insolvency
An administer may be appointed by the court to rescue the company as a going concern or if that not succeeds achive a better result than if the company would be wound up and if all else fails realising property to pay preferential creditors
What is a receiver in corporate insolvency law
A person tasked with retriving the property of the insolvent
A receiver can only be appointed by a charge-holder
No, also the court
Most of the time an administrator cannot be a receiver
True
A receiver may be put in charge of the insolvent company to stear it out of debt for the interest of the charge-holder
True
The receiver need to notify the company management in advance before their property is sold
False
How is a receiver different from an agent
A receiver has the right to change the legual relations of a company like an agent but unlike one they do not owe their loyalty to the one who’s company they have power over but rather the charge holder
A reciver does not owe a duty to act in the interest of a company when selling its property for parts but he owes a duty of dilligence when stearing the company out of debt
True, if there is some obvious thing like taking discounts they owe the company to act reasonably
A receiver should act in the interest of all the creditors
No, only the charge holder
Administration is the most popular insolvency prodedure
True
What is another word for winding up
liquidation
What is a wind up
When a liquidator is apointed to sell all the companies assets for cash, the going concern is not their concern and while the company may run for a while its fate is sield
What is a volentary windup
When it is not ordered by the court, if the directors can verify that all creditors will be payed they may controle the procedure (members volentary windup) otherwise a liquidator will be appointed by the creditors (creditors volentary windup).
Can a company pay of its debts, give security over property to creditors or sell an asset after petitioning for a windup
No, not unless the court allows it (no disposition of the companies property may occur)
May a court order the avoidance of transactions commenced before the petition for windup
Yes, transaction at undervalue, transactions giving preference to a particular creditor, transaction defrauding (avoiding specific) creditors, extortionate credit transactions and floating charges not taken at a time of solvency
What is misfeasance
The right to claim compensation for a breach of duty even upon liquidation (an exception to the no disposition rule)
May third party tradors or directors who trade wrogfully or fradulently to defraud creditors be forced to contribute to the liquid pool upon liquidation
True
How are actors prioritised in a liquidation
1, liquidation expenses 2, preferential debts 3, the perscribed part 4, debts secured by a floating exchange 5, unsecured debts 6, unpayed dividends and lastly company members gain the surplus if there is some left after all the liabilities are payed
