Insolvency Flashcards
Corporate insolvency
I’d a company finds itself in financial difficulty the 2 main options are:
Administration
Liquidation
Administration definition
Whereby a specialist takes control of company’s affairs in an effort to improve its Financial position and rescue it from insolvency
Admin can be appointed by
The court in response to a petition by the company members, the directors or any creditors
The holder of a qualifying floating charge over the company’s assets
The appointment of an admin has these effects
- The rights of creditors to enforce any security over the company’s assents are suspended
- there can be no enforcement of charges, retention, or titles clauses or hire
- any outstanding petition for winding up is dismissed
- no resolution may be passed to wind up the company
- the directors still continue in office, by their powers are suspended
Admin tasks
- he is the company’s agent
- defies legal proceedings, sell assents and borrow Money
- has the power to remover an replace directors and employees
- he can pay out monies to secured creditors without the need to seek approval of the court
Admin duties (legal)
- Must send notice of appointment to he company and publish notice of appointment
- Must obtain a list of company creditors and send notice of appointment to each
- Within 7 days of appointment, he must send notice of appointment to the registrar
Ending the admin
- Just be completed within 12months or the date on which it commenced- can be extended with consent or the court or service creditors
- May apply to the court for discharge at any time must make an application when the purpose of the order has been achieved-must also notify the registrar and all creditors
Voluntary liquidation
Insolvency act 1986 s84
Occurs when the members pass a resolution to go into liquidation. The type of resolution needed depends on the circumstances.
Ordinary resolution
Where the period fixed for the duration of the articles provide that a company should be wound up
Special resolution
Must passed if the company is being wound up for any other reason
2 types of voluntary liquidation
Members-used where the company is solvent
Creditors- used where the company is insolvent
Members voluntary winding up
Commences from the passion of the appropriate resolution
Members appoint a named insolvency or action we as a liquidator (s91)
Liquidator- responsible for realising the assets and distributing the proceeds
Liquidator presents his report to a final meeting of the members
Liquidators informs the registrar to the final meeting and submits a copy of his report
The registrar registers the report and the company is dissolved 3 months later
Creditors voluntary winding up
No deflation of solvency as company is insolvent
A meeting of creditors must be held within 14 days of resolution to liquidate (s98) the directors must submit a statement of company’s affairs (s99)
Liquidator is responsible for realising the assets and distributing the proceeds
Liquidator presents his report to the final meetings of members and creditors
Liquidator informs the registrar of final meeting and submits a copy of his report
The registrar registers the report and the company is dissolved
Compulsory liquidation
A compulsory winding up commenced when a petition for a winding up order is presented to the court
Effects of winding up
- Any floating charged crystallised
- All actions for the recovery of debts against the company are stopped
- Any legal proceedings against the company are halted and none may start unless leave is granted from the court
- powers of directors cease, although the directors remain in office
