M5.5 Directors' duties, DQ & SIP2

Question 1

What are a director’s duties?

Answer 1

S171 CA06: act within their powers
S172CA06: promote success of company
S173CA06: exercise independent judgement
S174CA06: exercise reasonable care, skill and diligence
S175CA06: avoid conflicts of interest
S176CA06: not to accept benefits from third parties
S177CA06: declare interest in proposed transaction or arrangement

Question 2

When did compensation orders start?

Answer 2

1 October 2015

Question 3

What is the purpose of IP investigations (SIP 2)

Answer 3

1. Assess potential for additional recoveries
2. Identify the causes of failure and those responsible for it

Question 4

How is the extent of IP investigations determined?

Answer 4

based on initial assessment of possible recoveries, taking into account:
 public interest
 potential recoveries
 funds available to fund investigation
 costs involved

 Minimum investigations: to identify assets and conduct required even if no funds to pay office holder

Question 5

When can IP proceed with investigations (and incur costs) without creditor or committee consent?

Answer 5

where:
 reasons for early action, for example public interest
 strong likelihood of recoveries

Question 6

How does an IP fund investigations?

Answer 6

Liquidator should not dissipate funds available to creditors on costs of investigating without obtaining creditor agreement

 Where no funds, liquidator may approach creditors or other interested parties for funding

 Option of third party litigation funding

Question 7

Who can be required to attend meetings of creditors or contributories?

Answer 7

s235 (attend on the office-holder at such times as the latter may reasonably require.)

An office holder can require any of persons to attend meetings of creditors or contributories

 Court can require attendance at meetings, including liquidation committee

 Office holder must give at least 21 days notice

 Questions at discretion of chairman of meeting

 Reasonable travelling expenses as expense of the liquidation/ administration

Question 8

When must the OR call a public examination?

Answer 8

Unless the court otherwise orders, the official receiver or, in Scotland, the liquidator shall make an application under subsection (1) if he is requested in accordance with the rules to do so by—

(a)one-half, in value, of the company’s creditors; or

(b)three-quarters, in value, of the company’s contributories.

Question 9

Who can take part in a public examination?

Answer 9

(a) the official receiver;

(b) the liquidator of the company;

(c) any person who has been appointed as special manager of the company’s property or business;

(d) any creditor of the company who has tendered a proof or, in Scotland, submitted a claim in the winding up;

(e) any contributory of the company.