Insolvency Law Flashcards
What is the purpose of administration?
To rescue the company as a going concern
Achieve a better result for the creditors than would be likely winding up
Realise the company’s assets to make a distribution to secured creditors
Who may appoint an administrator?
Company acting by ordinary resolution - >50%
Directors acting by majority
One or more creditors
Qualifying floating charge holders who can show amounts to charge, has power - can apply if company in liquidation and must notify others
What is the appointment of administrators outside of court?
Creditors cannot make an appointment out of the court
Company - give 5 days notice to floating chargeholders
QFCH - 2 days prior notice to other QFCH
Must file - notice, statutory declaration of lawfulness and enforceability, statement by administration outlining purpose likely to be achieved and consents
What is the appointment of administrators in court?
Company likely to become unable to pay debts and reasonably likely to achieve purpose of administration
What is the timeline and duties of an administrator?
Within 7 days - file notice and company statement of affairs from employees/officers (have 11 days)
Within 8 weeks - statement of proposals to registrar, creditors, members - invite creditors to form a committee
One year - terminated unless extended by court or by majority of creditors
What are the powers of administration?
Takes on powers of director
Remove/appoint directors
Call a meeting of members/creditors
Apply to court for directions
Make payments to secured creditors
Make payment to unsecured creditors
Present or defend a petition to wind up
What are the consequences of administration?
Moratorium - no legal, recovery, enforcement, resolution
Assets subject to floating charge - sell
Assets on hire purchase or subject to fixed charge - sell
Directors - power suspended
Employees - not dismissed automatically
Transactions at an undervalue and precedence
What is an administrative receiver?
Appointed by a floating charge holder, manager who has control over most of company’s property and wide powers over business
Causes floating charges to crystallise
What is a fixed charge receiver?
Appointed by fixed charge holder in event of borrower’s default
Collects rent/sells property
Usually surveyor/property specialist
Realise property for benefit of lender, owes duty of care to borrower - not go to extreme lengths
What are company voluntary agreements (CVA)?
Company and creditors make an agreement on how debts will be paid in what proportions
Composition of debt, time period (3-5 yrs), equity swap
Continues trading
Can apply for a moratorium in 28 days
What is the procedure of a CVA?
Nominee appointed
Reports to court on likelihood of success
Creditor approval required
Binds all unsecured creditors - not fixed charge holders
Any creditor can appeal to court in 28 days if unfairly prejudiced
What is liquidation and what are the different types?
The official winding up of a company
Voluntary/compulsory
What are the members procedures for voluntary liquidation?
Company is solvent
Commenced by special resolution of members
Directors give a declaration of solvency
Notice in London Gazette within 14 days
Appoints liquidator by ordinary resolution
What are the creditors procedures for voluntary liquidation?
Directors unable to make declaration of solvency
Shareholders pass resolution to wind up, directors nominate liquidators
Directors call creditor meeting within 14 days of resolution giving 7 days notice to creditors
Meeting - statement of affairs, creditors appoint liquidator, form committee
How is a liquidator appointed in creditor’s voluntary liquidation?
Director nominates liquidator
Creditors make decision after 3 days of directors nomination
I f less than 10% creditors object, proposal approved
