Liquidation Flashcards
What is a liquidation?
Where a licensed insolvency practicioner collects all the assets of a company and sells, so that debts can be paid pro rata to the creditors.
What is Members’ Voluntary Liquidation?
Where a company that is solvent and can meet its debts is liquidated. A special resolution is required with a Declaration of Solvency stating that all debts can be paid within twelve months.
A liquidator is still needed, and the company is then dissolved and struck off the registrar.
What is Creditors’ Voluntary Liquidation?
It is where the company puts itself in to liquidation, despite the name.
Creditors can appoint their own liquidator as opposed to the one appointed by the company.
What is the liquidators duty in a Creditors’ Voluntary Liquidation?
Collect in the assets and apply them in the correct priority.
An account of receipts and payments is prepared and the company is dissolved and struck off the Register.
What is Compulsory Liquidation?
Usually on the application of a creditor, it liquidates a company by court order.
It goes to an Official Receiver until creditors appoint their own liquidator.
Can companies dispute court order liquidation?
Yes, they have an opportunity to provide reasonable grounds for doing so, but the court will then decide.
What are the rights, powers and obligations of liquidator?
Maximise the assets and distribute to creditors.
Insolvency Act 1986 gives power to obtain information needed through the courts if necessary.
Prepare a report on conduct of directors for disqualification and potential criminal offences.
What is a proof of debt?
Drawn up by the creditor to show written proof of how much they are owed. Liquidator will either accept or reject this.
How are secured creditors affected by liquidation?
They still have the right to enforce their security of an asset. If a balance remains outstanding, they become an unsecured creditor.
What is the usual order of payment?
1 Fixed Charges, in order of creation date
2 Expenses of liquidation, and liquidators’ remuneration
3 Preferential Creditors (employees)
4 Floating charges, in order of creation date
5 Unsecured Creditors
6 Anything left goes back to the members.
Is it possible to restore a company after it has been struck off the register?
Yes, if for example it finds land it didn’t know was owed before.
They will appeal to the court, and have to abide by the court’s terms.
