Module 1 - Introduction To Liquidations Flashcards
What is a Limited Company made up of?
Board of Directors (1 or multiple) (run it);
Members / Shareholders (own it);
3 Types of Liquidation?
Members’ Voluntary Liquidation;
Creditors’ Voluntary Liquidation;
Compulsory Liquidation
Which 2 Liquidations are for Insolvent Companies?
Creditors’ Voluntary Liquidation;
Winding up Court
2 x Tests for assessing insolvency?
Cash Flow Test;
Balance Sheet Test;
What is Insolvent in statute?
A company is unable to pay their debts as and when they fall due;
Their liabilities outweigh their assets;
County Court Judgement against you has been returned unsatisfied;
Somebody has issued a statutory demand against you and has been returned unpaid
Why would someone do an MVL?
Tax efficient way to extract money from Company (dividend = income unless done by a liquidation - treated as Return on Capital Gains - CGT rather than income tax);
Minimum amount to be owed to lodge a winding up order?
£750.00
Voluntary Liquidation Process
Directors hold a Board Meeting to start process;
Directors give notice to Shareholders there will be a General Meeting to pass a Special Resolution;
Shareholders pass resolution and it is in Liquidation
Alternative Options to Liquidation?
Negotiate a Repayment Plan;
Retention of Title Enforcement;
Lien;
Withold Supply;
Litigate and Execute
How much is the Official Receiver’s Fee?
Administration Fee - £5,000
General Fee - £6,000
What is Section 129?
Commencement of Winding Up - date of Presentation of the Petition
What is Section 247?
Goes into Liquidation - Date of the Order
What is a Special manager?
Someone appointed to help on a case - able to assist where required.
Appointed by Liquidator
Powers are whatever court order says, duties are to help Liquidator
MVL - 6 Resolutions to be passed at first Board Meeting
Wind up the Company;
Declaration of Solvency;
Notice to QFCH (bank or financial institution or anybody who has a charge of assets) - 5 Business Days;
General Meeting of Members to be held (14 days notice required - if 90% of Shareholders agree, this can be waived (95% if its a PLC));
Chairperson for the Meeting (one of the shareholders);
Distribution in Specie - for Directors to agree that actually instead of just distributing cash, assets can be used in place
Declaration of Solvency - EODT
Declaration the Business is Solvent;
Enquiry made;
Of the opinion;
Company can settle Debts;
In Twelve months
Should be included with an Asset and Liability Sheet
How many directors must swear the Declaration of Solvency?
If 1 or 2 Directors - all must sign;
If more than 2 - a majority must swear
Special Resolution
Require 75% of Shareholders voting to pass them
Ordinary Resolution
Require simple majority to be passed
4 x Resolutions to be passed at General Meeting
To put Company into Liquidation (special);
That the Company may be able to make a distribution in specie (special);
To appoint a Liquidator (ordinary);
To agree any remuneration of Liquidator (ordinary)
Timeframe for notifying Gazette that the Company is in Liquidation
14 days
How long to notify Companies House of Company in Liquidation
15 Days
How long to tell Gazette and Companies House that a Liquidator has been appointed?
14 days
Creditors must be informed a Liquidator has been appointed within how many days?
28 Days
CVL - 9 Resolutions to be passed at Board Meeting
Company should be Wound Up;
Statement of Affairs to be prepped;
Agree to convene GM;
Agree chair of GM (notice is 14 days - 90% can waive);
Agree Creditors Decision Procedure (Virtual Meeting or Deemed Consent); (Objection needs to be 10% in value of creditors);
Agree Remuneration of Liquidator;
Give Notice to any QFCH (5 Business Days);
Board agree who they want to be Liquidator
3 x Resolutions at CVL GM?
Wind up the Company and put it in Liquidation (Special);
Who the Liquidator (ordinary);
Agree Remuneration (ordinary);
CVL Notices of a Company in Liquidation?
Gazette - 14 Days
Registrar of Companies - 15 Days
Notices of a Liquidator being Appointed:
Gazette - 14 Days
Registrar - 14 Days
Creditors - 28 Days
Statement of Affairs to Registrar of Companies - 5 Days
Fixing of Reports and How Often?
Annual Progress Report - every 12 months (within 2 months of the anniversary)
Insolvency Service - CDDA - 3 months
How many days do Creditors get after Notice of decision procedure has been delivered in CVL?
3 Business Days
When must Creditors receive Statement of Affairs?
Business day before the decision deadline
What is SIP 6?
Company History / basic company info
What are the ratios for Creditors requesting a Physical meeting?
10% in value;
10% in number;
10 creditors in total
When must the physical meeting be called if threshold is met?
Must be called within 3 business days of being met
What is the deadline a creditor can request a physical meeting?
A request can be received any time before the decision deadline
What is Section 212?
Misfeasance
What is SIP 1?
The Code of Ethics
What is the Threat of the Objectivity Principle?
Self-Interest Threat
What is the Threat of the Independence and Integrity Principle?
Self-Review Threat
What is the Threat with Significant Professional and Personal Relationship Principle?
Familiarity Threat
What is the Threat with the Professionalism and Duty of Care Principle?
Advocacy Threat
What is the Threat with the Confidentiality Principle?
Intimidation
