Topic 12: Company Law: Meetings, Resolutions and Winding up companies Flashcards
What does resolution mean and what are the different types of resolutions that can be used?
Resolution = formal way in which a decision of the shareholders is proposed and passed. (Normally at Annual GM) Private companies can ONLY propose written resolutions.
Ordinary, Special and Written Resolutions.
Ordinary - resolution that has been passed by a simple majority.
Special - no less than 75%. Resolution maninly used to reduce share capital, re-register company from private-public, change of name, alteration of articles etc.
Written - passed by simple majority of the total voting rights of eligible members.
What are public companies required to do once a year?
- Hold an annual general meeting.
- Notice of 21+ days to all members.
No requirement for private to do this.
Explain the notice required for AGM for a PLC, general meetings and special meetings.
AGM - At least 21 days to all.
General meetings - 14 days notices
Special notice - At least 28 days for appointing and removing auditors, removing director or appoint another director in place of.
How does voting work at meetings?
- By a show of hands (majority) or
- by poll (in proportion to their shares)*
*requires minimum conditions to demand a by poll way of voting.
Whats the procedure at meetings? (4-steps)
1) Quorum - minimum number of members which must attend for the meeting to be valid;
2) Voting - by show of hands or by poll;
3) Proxies - person who attends a meeting and votes on behalf of a member (s.324);
4) Records - company must keep records of all resolutions passed other than at general meetings; minutes of general meetings; decisions taken by sole member companies.
Who can call a general meeting?
- By directors of their own volition (s.302);
- By directors when required to do so by shareholders representing 5% of the company’s voting capital (s.303).
What are the steps of liquidation? (3)
1) Realisation of assets
2) Discharge of liabilities
3) (Distribution of any surplus)
Whats the order that company debts will be paid off during liquidation?
1) Liquidation expenses
2) Preferential debts
3) Debts secured by floating charge
4) Unsecured debts
5) Deferred debts
6) Remainder distributed to members
Fixed charge is removed from the assets pot before paying out anything as they have contractual right and property interest.
What are the rules relating to personal liability on the directors of insolvent companies?
WRONGFUL TRADING - Director may be ordered by the court to contribute to the company’s assets if:
• The company has gone into liquidation; and
• They continued to trade when they knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation.
FRAUDULENT TRADING - directors have deliberately continued to trade to increase the amount of income prior to liquidation.
What does it mean when a company goes into administration?
Legal process where an administrator is appointed in order to fufill one of the administrative objectives.
1) Rescue company and bring about better cashflow
2) Achieve a better result than being wound up
3) Realize property to distribution to secured/preferential creditors.
How is an administrator for a company appointed, the effects of an appointment, their powers and duties?
Appointed by directors, the company, or holders of a fixed or floating charge; must be qualified insolvency practioner.
Effects of appointment - given management powers over the company.
Duties to carry out objectives 1-3:
1) Rescue company and bring about better cashflow
2) Achieve a better result than being wound up
3) Realize property to distribution to secured/preferential creditors.
What is a CVA? who must it be apporved by?
An agreement between the company and its creditors;
May comprise - composition of debts (less than value - lower amount payable) and/or scheme of arrangement;
Supervised by an insolvency practitioner (nominee);
CVA must be approved by:
• Simple majority of members;
• 75% of creditors by value.
What is a CVA? How is the debt handled after this? And who must it be approved by?
An agreement between the company and its creditors;
debit is handled by either scheme of payments to creditors OR
compostion of the debts where the value has decreased in order to retrieve full payment by company
Supervised by an insolvency practitioner (nominee);
CVA must be approved by:
• Simple majority of members;
• 75% of creditors by value.
Explain voluntary liquidation
Two types of voluntary liquidaton (either members/creditors winding up)
Members: if the company is solvent;
- General meeting of shareholders will pass a special resolution to commence the winding up:
- Directors must give a declaration of solvency to the Registrar of Companies:
- This means the company will be able to pay its debts within 12 months.
Creditors:
- Company must call meeting of creditors who can then nominate a liquidator.
Explain compulsory liquidation
Company has failed one of the grounds of winding up and has no choice but to liquidate under the following conditions:
1) Company has resolved by special resolution;
2) Company has failed to obtain a trading certificate within 1 year of incorporation;
3) Company was public company before 1980 and has failed to re-register;
4) Company has not commenced trading or has suspended business;
5) Company cannot pay its debts:
i) Creditor serves a statutory demand for payment; ii) Creditor obtains judgment but cannot obtain payment;
If it is proved to the court that company is unable to pay its debts; Court considers it is just and equitable to wind up the company.
