Winding up

Question 1

What is the Companies Act 2006?

Answer 1

Laws regarding company relations with third party and members. It regulates activites of company director, establishes right to vote in resolutions etc

Question 2

Who runs company and what are their role?

Answer 2

Shareholders, have no duties but can take interest in company affairs and can assert control over directors

Question 3

How can shareholders assert their influence over directors?

Answer 3

By holding general/class meetings (302). Directors should call but failure to do so means if shareholders have at least 5% of voting rights they can call (302)

Question 4

When does CA 656 say directors have to call a general meeting?

Answer 4

If there is a serious loss of capital or net assets fall below half of share capital.

Question 5

How many days does a director have to call a meeting after the requirement? How long after the director has been aware of the requirement should the meeting take place?

Answer 5

21 days (304)
No longer than3 months (305)

Question 6

What if directors fail to call the meeting?

Answer 6

Shareholders with at least half of voting rights can call meeting (303)

Question 7

What is the case of Ross v Telford?

Answer 7

Husband and wife own company as 2 equal shareholders. Divorced and couldnt cooperate in meetings, articles required quorum of 2 shareholders. Husband appealed to court to change articles so that only required one shareholder for decisions - wouldnt do this unless minority shareholder was preventing majority shareholder making decisions

Question 8

What are the requirements of an AGM?

Answer 8

PLC must hold once a year (336)
21 days notice (with time, location, nature, resolution)
Declare dividends and appointments of directors.

Question 9

What is the role of shareholders and directors in an AGM?

Answer 9

Directors;
report om acheivements and developments of company
SHareholders;
analyse company performance and vote on issues

Question 10

What are the requirements to move a resolution?

Answer 10

Represent at least 5% of voting rights or at least 100 members who have the right to vote on a resolution

Question 11

How are resolutions passed in an
a) AGM
b)Ltd

Answer 11

a) by hand or poll (majority)
b) written

Question 12

What is an ordinary resolution?

Answer 12

Used for routine decisions in a company, if no type of resolution is stated then it is assumed to be ordinary, its passed by a simple majority (50%)(282)

Question 13

WHat are special resolutions?

Answer 13

Major changes in the company
Needs to be passed by 75%
Meetings can only correct grammatical errors etc
May be required by statute or articles - e.g change of name, change from plc to ltd.

Question 14

WHat are the requirements for special resolution?

Answer 14

14 days notice of resolution
Resolution filed at companies house

Question 15

What are the requirements for written resolution?

Answer 15

No meeting required - just sign resolution
Requires a statement signifying how to show agreement and by which date
In absence of articles expressing, have 28 days (exc day of meeting) for lapse of time

Question 16

How many votes are required for written resolution?

Answer 16

Depends on type of resolution - whether special or ordinary

Question 17

When might written resolutions be used?

Answer 17

By ltd and when dismissing a director before time of office is up so they can express why they shouldnt be removed.

Question 18

How many days notice is required for a general meeting?

Answer 18

14

Question 19

For shorter than required notice - what percentage of those with voting rights are needed?

Answer 19

90% for ltd
95% for Plc
100% for AGM

Question 20

What is a qualifying member in a quorum? What is the exception?

Answer 20

MEmber, proxy (but proxies cant be for the same shareholder)

Question 21

What does the insolvency act 1986 state?

Answer 21

allows secure creditors to realise security
ensure creditors are treated equally favourable
attempts to keep an insolvent company afloat.

Question 22

What are the options for insolvency?

Answer 22

Administration,
voluntary agreement with creditors
complusroy/voluntary liquidation

Question 23

What is administration?

Answer 23

Holds business together whilst plans are formed to restructure or sell the business assets to secure a better result for creditors than what liquidation would.

Question 24

What is the role of the administrator?

Answer 24

Appointed by court when theyre satisfied the business can’t repay its debts.
They take over control of company and formulate proposals for creditors to vote on
If they cant get creditors a better result than if liquidated then they realise property to ditribute to secure or preferential creditors.

Question 25

What are the consequences of administration?

Answer 25

Removal of director (with consent of administrator)
Court give direction regarding their functions
Make payments to secured or preferential creditors
May pay unsecured creditors if will help company acheive administration e.g if company is denied supplies from major supplier unless payment made

Question 26

What is a voluntary agreement?

Answer 26

Avoids the company being wound up, sets out an agreement with company and creditors setting out debts and payments.
Consists of a proposal to creditors to take a proportion of what they are owed or agreement to pay debt back over certain number of years (more than they would get in liquidation) or effect a takeover
Directors remain in charge

Question 27

What percentage of shareholders need to accept a voulntary agreement?

Answer 27

Simple majority (50%+)

Question 28

What is liquidation and what is the role of the liquidator?

Answer 28

Process of dissolving the company
Liquidator has to realise company assets and distribute in order, distributing any surplus to contributors after creditors payed. Has to report to court company debts, assets, name of creditors and securities held by them.

Question 29

What are the type of voluntary liquidation?

Answer 29

Members voluntary;
Applies in solvent company, directors have to make a declaration of solvency (79)
Can become creditors voluntary is doesnt satisfy creditors.
Creditors voluntary;
creditors comprise court action vs debtors assets or liquidation of company, forces company to cease trading and devalues the assets.

Question 30

What is required for members voluntary winding up?

Answer 30

75%
Notice must be given to Lonodn gazette within 14 days after meeting for the resolution to wind the company up.

Question 31

How much notice must be given for a creditors voluntary winding up?

Answer 31

14 days

Question 32

Does compulsory liquidation occur in solvent or insolvent companies?

Answer 32

Occurs in both but mainly insolvent

Question 33

What is compulsory liquidation and what are the reasons for it?

Question 34

Who can petition for compulsory liquidation?

Answer 34

Creditor, director, contributory, liquidator, secretary of state