Winding up companies

Question 1

Mann v Goldstein

Answer 1

Petition of winding up from some directors can be vetoed by another directors - Barbers in London wanted to wind up however an injunction was bought successfully against the winding up.

Question 2

Re Equiticom International Plc

Answer 2

Resolution passed where majority of directors agree to have company wound up at board meeting - duty of all directors to implement it even if they don’t agree with it

Question 3

Re Instrumentation Electrical Services

Answer 3

A director may not petition to have a company wound up unless they are a creditor

Question 4

Fowler v Commercial Timber Company

Answer 4

voluntary winding up there is no effect on employment

Question 5

Chapmans Case

Answer 5

compulsory winding up - employers are automatically dismissed unless liquidator re employs them

Question 6

Order of assets amongst creditors

Answer 6

1. Debentures secured on a fixed charge - factory
2. Liquidation costs
3. Preferential creditors - wages, employee pensions - changed by enterprise act 2002
4. Ring fenced fund for unsecured creditors - top slicing - maximum 600,000
5. Debentures secured on a floating charge
6. Unsecured creditors
   If solvent and wound up:
7. repay money owing to members
8. repay capital - preferential shareholders then ordinary shareholders
9. Distribute further sums to member para passu

Question 7

Robin Hood Centre PLC Brooks v Armstrong -

Answer 7

company went into creditors voluntary liquidation. Brooks the liquidator bought proceedings against directors of the company for misfeasance and wrongful trading. Company accounts showed surplus of assets for 12 years prior to liquidation. Liquidators state that the companies were in fact balance sheet insolvent during period due to mis stating depreciaton on company accounts - Michael Hayhoe and Brian Fontein.

Question 8

Alternatives to liquidation

Answer 8

1. Administrator - returning company to commercial viability, better deal for creditors, realising property to distribute
2. Voluntary arrangements - insolvency procedure not liquidation - agreed by 75% of companys unsecured creditors - proposed by liquidator, admin, directors
   either through - composition - better deal for unsecured creditors or scheme arrangement - pay back over scheduled period of time
3. A moratorium for small companies - period of time to generate money needed.

Question 9

Salomon v A Salomon and Co Ltd

Answer 9

monumental case law - veil of incorporation formed
liability cannot lie with shareholders of liquidated company if they fail to pay up - corporate veil established
upheld that creditors of an insolvent company can’t sue shareholders to pay up outstanding debts - ca 1962.

Question 10

Dorchester Finance Co v Stebbing

Answer 10

Director disqualified for signing blank cheques that got company into a lot of debt. Director of company must act in good faith and interests of the company
CA 2006 - exercise reasonable care, skill and diligence
avoid conflicts of interest: vicarious liability - M and B - omissions of another person