COMPANIES ACT Flashcards
What is section 4?
The solvency and liquidity test.
What is section 20?
Validity of company actions.
What is section 76?
Standards of directors’ conduct.
What is section 77?
Liability of directors and prescribed officers.
What does section 4(1) say?
A company satisfies the solvency and liquidity test if considering all reasonably foreseeable financial circumstances of the company art that time:
1. the assets of the company equal or exceed the liabilities of the company
2. it appears that the company will be able to pay its debts as they become due in the ordinary course of business for a period of 12 months after the date on which the test is considered or distribution.
On what principles is the solvency and liquidity test based on?
As long as the test is satisfied, creditors will not be prejudiced if the capital of the company is used other than for the ordinary business purpose of the company.
What are the two types of solvency that the test requires?
- Factual solvency
- Commercial solvency
What is factual solvency?
- Balance sheet test
- Based on all reasonably foreseeable financial circumstances that assets are in excess of liabilities
What is section 77(3)(a)?
Acting without authority.
What is section 77(3)(b)?
Reckless trading.
What is section 77(3)(c)?
Fraud.
What is section 77(3)(d)?
False or misleading statements.
Which section deals with the registration of a company?
Section 14.
What is section 77(3)(e)?
Unlawful distributions.
Which section deals with the legal capacity of a company?
Section 19.