Liquidation Part Three Flashcards
What are the two types of voluntary liquidation?
Members’ Voluntary Liquidation (MVL) – company is solvent
Creditors’ Voluntary Liquidation (CVL) – company is insolvent
What is required for an MVL under s.579 CA 2014?
A statutory declaration of solvency made by directors stating that debts can be paid within 12 months.
What documents must be included in the declaration of solvency?
Statement of affairs (≤3 months old)
Auditor’s report stating declaration is not unreasonable
Auditor’s written consent
Copy included in meeting notice
What happens if the MVL fails (company can’t pay debts)?
It converts into a CVL; directors may be personally liable for lack of reasonable grounds.
What triggers a CVL?
When a company is insolvent and members resolve to wind up or an MVL fails.
What meetings must directors convene in a CVL?
A members’ meeting
A creditors’ meeting (same day or following day)
What happens if members and creditors nominate different liquidators in a CVL?
The creditors’ choice prevails unless the court rules otherwise.
What section confirms the liquidator’s powers in voluntary liquidation?
s.588 CA 2014 – grants power to carry on business, litigate, sell assets, etc.
What is the striking off process under s.731 CA 2014?
A company voluntarily dissolves by filing returns, advertising intention, and submitting Form H15.
What are the consequences of striking off?
Company ceases to exist
Property vests in the State
Loss of limited liability if trading continues
What is an unfair preference under s.604 CA 2014?
A disposition made within 6 months (or 2 years for connected persons) that favors one creditor over others with intent to prefer.
How is intent to prefer established under s.604?
Must be inferred from facts; presumed in dealings with connected persons.
What is a fraudulent disposition under s.608 CA 2014?
A transfer of property made with the effect of defrauding creditors or members, regardless of intent.
What is the rule on post-petition dispositions under s.602 CA 2014?
All transfers or payments made after the winding-up starts are void unless court-approved.
When is a floating charge invalid under s.597 CA 2014?
If created within 12 months (or 2 years for connected persons) while insolvent, unless new money was advanced at the time.
What case confirmed the cash flow test for insolvency?
Re Creation Printing Co (1981) – insolvency assessed by inability to pay debts as they fall due.
