Insolvency law: Corporate and personal

Question 1

What is administration?

Answer 1

• the aim to rescue a company as a going concern
• achieve a better result for creditors than liquidation
• realise property to pay one or more secured or preferential creditors

Question 2

Who can appoint an administrator?

Answer 2

• a company
• directors
• one or more creditors
• qualifying floating charge holder

Question 3

Within how many days must an administrator make their requirements for statements known and how long do the officers and employees have to comply?

Answer 3

• 7 days

- 11 days

Question 4

How long does administration last?

Answer 4

Usually 12 months - can be extended with consent of court or by majority of creditors

Question 5

What are the consequences of being under administration?

Answer 5

• administrator takes over power from directors
• moratorium in place
• assets subject to floating charge can be sold
• assets on fixed charge can be sold with approval of the court
• contracts of employment can be terminated

Question 6

What is the role of a receiver?

Answer 6

Realisation of company’s assets which are then sold

Question 7

Describe Company Voluntary Arrangements (CVA)

Answer 7

• alternative to winding up
• agreement between company and creditors setting on which debts are to be paid , and in what proportion
• members by simple majority or creditors by 75% majority must approve proposed CVA
• CVA binding on all unsecured creditors
• directors can apply for short moratorium

Question 8

Who can propose a CVA nominee?

Answer 8

• company
• administrator
• liquidator

Question 9

How long does CVA usually last?

Answer 9

3 - 5 years

Question 10

What type of resolution needs to be passed for voluntary liquidation?

Answer 10

• special in most circumstances

- ordinary if period fixed for duration of company expires

Question 11

When does a members’ and creditors’ voluntary wind up apply?

Answer 11

• members’ when company solvent

- creditors’ when company insolvent

Question 12

Describe the members’ voluntary winding up process

Answer 12

• directors make declaration of solvency, pay debts in 12 months
• liquidator appointed by members
• statement of solvency
• liquidator reports to members

Question 13

Describe the creditors’ voluntary winding up process

Answer 13

• insolvent company
• liquidator appointed by members and creditors
• statement of affairs
• liquidator reports to members and creditors

Question 14

What are the possible grounds for petition on compulsory liquidation?

Answer 14

• plc not been issued trading cert within year of inc
• creditor owed >=£750 has served a written demand and not been paid in 3 weeks
• just and equitable if no other options by court

Question 15

Who can petition for compulsory liquidation?

Answer 15

• the BIS
• a member (6 of last 18 months)
• creditor owed £750 and done written thing

Question 16

Who is appointed as the liquidator in compulsory liquidation?

Answer 16

Official receiver

Question 17

Who does the liquidator for compulsory liquidation report to?

Answer 17

Court

Question 18

What charges can be avoided?

Answer 18

• charges not registered within 21 days
• floating charge created within 12 months of wind up (2 years if connected person)
• undervalued transaction within 2 years unless they can prove good faith, best for business

Question 19

What is the order of people receiving their money upon liquidation?

Answer 19

• liquidators
• fixed charge
• employees
• floating charge
• unsecured creditors
• post-liquidation interest
• members dividends then capital

Question 20

What is an individual voluntary arrangement (IVA)?

Answer 20

Alternative to bankruptcy, whereby an individual has an agreement with their creditors

Question 21

Process for IVA

Answer 21

• individual appoints a nominee
• nominee must call creditors meeting
• creditors accept or reject proposals
• if accepted, supervisor appointed
• upon completion, all liabilities within are discharged

Question 22

Who can petition for bankruptcy?

Answer 22

• individual
• unsecured creditor owed £750
• supervisor of an IVA

Question 23

Process of bankruptcy

Answer 23

• petition received by courts
• pass a bankruptcy order
• become undischarged bankrupt
• trustee appointed to administer bankruptcy
• trustee requires creditors to prove their debts and will rank them

Question 24

Request for individual bankruptcy will not be made when

Answer 24

• debts are

Question 25

What does the estate of a trader exclude?

Answer 25

• tools
• property held on trust for other person
• certain tenancies protected by law