Chapter 7: Insolvency, Winding Up and Dissolution Flashcards
(28 cards)
What is the key difference a member’s voluntary liquidation and a creditors’ voluntary liquidation?
Members’ - directors must be able to make a statement of solvency
Creditors’ - directors cannot make a statement of solvency.
What is the function of the Gazette?
Publish notices
When does compulsory liquidation occur?
When a court order is issued to wind up a company, usually because:
- a sum of £750 or more is owed and unpaid
- the company has failed to settle a debt
- a formal statutory demand has been served in respect of a debt which has not been paid.
What steps are taken by the official receiver following their appointment in a compulsory liquidation?
- investigate assets and liabilities
- consider meetings of creditors and contributories
- consider appointing a liquidator
- wind up the company
- issue report to registrar
What are the purposes of an administration order?
Court gives power to manage the business to an administrator to:
- rescue the business as a going concern, or obtain a better result for creditors than otherwise possible
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What are the powers of a holder of a floating charge under EA2002?
They may appoint an administrator out of court.
When does administration end?
One year after commencement, or when the purpose has been achieved (if earlier)
What is a corporate voluntary arrangement?
Agreement approved by the court for a company to reach a composition in satisfaction of its debts
What process is required to approve a formal voluntary arrangement?
- nominee appointed to reach a composition
- two meetings convened: one for creditors, one for members.
- if approved by creditors, the arrangement is binding on all creditors entitled to receive notice of the meeting
- submission to court for approval
What is the difference between a voluntary arrangement and voluntary liquidation?
In a voluntary liquidation the company is solvent.
What is the role of a “receiver”?
Appointed to manage all or part of a company’s property.
How is a receiver appointed?
Through a debenture or other instrument secured over the company’s property.
What conditions must be be met for one of the directors if a company to apply for a voluntary striking off?
- not have changed names in last 3 months
- not undertaken any trading activities or disposed of assets in last 3 months
- only permitted activities in last 3 months must have been preparation for striking off
- must not be subject to insolvency procedures
Which parties must be informed if directors of a company are seeking a voluntary striking off?
- creditors
- any directors who did not sign relevant form
- managers or trustees of pension scheme
- applicable VAT office
What document must the company send for a voluntary striking off?
DS01
Why might the register instigate the striking off of a company?
The registrar decided the business is defunct, since so returns have been made and/or the registered address is incorrect.
What notification does the registrar give prior to striking off?
2 formal letters , each with 14 days notice to respond. A notice is published in the Gazette. If no objections in 2 months, the company will be struck off.
Who is authorised to order the restoration of a company?
The Registrar or the courts
What are the applicable timescales for restoration of a company?
Within 6 years of striking off for a application to the registrar.
Within 20 years for application to the courts
Explain the procedure for administrative restoration.
- company must have been carrying on business at the time of striking off
- the Crown must consent if any property is bona vacantia
- the applicant has delivered all documents to bring the company records up to date
What form must be completed for withdrawal of a striking off application?
DS02
What are the grounds for seeking a disqualification order under CDDA 1986?
- persistent breach of company legislation
- failure to pay taxes
- fraud
- fraudulent/wrongful trading
- failure of directors to comply with provisions of IA 1986
- ## inappropriate conduct in entering transactions at an undervalue
What action may be taken against a person who acts as a directors while disqualified?
The director is personally liable with the company for all the relevant debts of the company during the time he acted as a director.
What are the purpose and powers of the IS?
Insolvency Service administers and investigates the affairs of individual bankrupts and insolvent companies, and the suspected misconduct of directors.
