Liquidation

Question 1

aim

Answer 1

convert into money the assets of a company to repay creditors and distribute any surplus in a reasonable and efficient manner

Question 2

ways liquidator can be appointed

Answer 2

s241:
Shareholders, the Board, the Court

Question 3

case for court appointed liquidator

Answer 3

Flett v J H Flett

Question 4

pari passu principle and case

Answer 4

all creditors should share equally in the distribution of assets (AG v McMillan)

Question 5

preferential claims

Answer 5

Liquidation costs

Employee wages and PAYE collected

Layby sales creditors

Costs of a compromise meeting

Company’s own tax debts

Question 6

effect on insolvent transactions

Answer 6

transactions entered into whole the company was unable to pay its debts, made within 2 years before liquidation (s293(3))

Question 7

cases for insolvent transactions (2)

Answer 7

Sims v ABC Tissue
Shephard v Steel Building

Question 8

reasons the court can deny recovery by liquidator (s292-293)

Answer 8

The creditors received the property in good faith

A reasonable person in the creditors position wouldn’t have suspected the company’s insolvency

The creditor gave value for the property or altered their position in reasonable belief that the transfer was valid and would be set aside

Question 9

cases for receiving property in good faith (2)

Answer 9

Re Pasadena
Shephard v Steel Building