Week 5 Flashcards
What’s Certificate of Incorporation for a company?
The ‘birth certificate’ of the company.
What is the winding up (liquidation) of the company?
The death of the company
What 2 ways can the end of a company happen by?
- Compulsory winding up (via the courts)
- By its own hand (voluntary by passing a resolution)
What’s the main legislation for Insolvency?
Insolvency Act 1986
What’s the procedure for a member’s voluntary winding up?
Members pass a special resolution (75%).
What 2 documents must be produced by the directors in a member’s voluntary wind up?
Declaration of solvency and statement of assets and liabities.
In how many days must the declaration and statement be filled with the registrar?
15 days.
Who must appoint a liquidator to wind up the company and distribute the assets?
The members must appoint a liquidator to wind up the company and distribute the assets.
Name 2 reasons for a members’ voluntary wind up
- No longer a need
- Regulatory changes
- Business was set up for specific event or time
- Tax advantages vs taking income
- Shareholders want to split assets
- Directors retiring or moving overseas
- Reorganisation or subsidiary of a group
After the liquidator informs the registrar, how long must the company be dissolved after?
3 months.
What’re the 2 alternatives to Liquidation?
Administration and Voluntary Arrangement.
What’s Administration?
A process by which an attempt is made to rescue an insolvent company as a going concern.
What is the person in charge of the process of Administration called an what must they be?
They’re called an Administrator.
They must be a qualified, Licenced Insolvency Practitioner.
Who is the Administrator appointed by?
The court on application of the shareholders, directors, holders of floating charges on all the company’s undertakings.
When is the application to the court made?
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Only when a company is, or likely to be, unable to pay its debts.
How long does the appointment of the administrator last and who is it renewed by?
Lasts for one year and is subject to renewal by the creditors or the court.
Name 2 reasons for Administration
- Rescue company as a going concern
- Make a better result for creditors
- Realise assets for secured and preferential creditors
What happens when the appointment of an Administrator happens?
- They take over management of the company and functions of Directors
- Directors can remain but cannot interfere with Administrator’s work without permission
How long does the Administrator have to submit a proposal for the company to unsecured creditors and the registrar?
8 weeks
How long do the creditors have to approve the proposal?
10 weeks.
Name 2 duties of the Administrator
- Fiduciary duty to company and its secured creditors
- Duty of care
- Duty to take reasonable steps to get best price for assets.
