Insolvency

Question 1

When is a company deemed insolvent?

Answer 1

when a creditor has served on the company a ‘statutory demand’ (a written demand in prescribed form) for an outstanding debt in excess of £750 and the company does not pay the creditor within 21 days.

Question 2

When is an individual insolvent?

Answer 2

An individual is insolvent when a debt is payable immediately and the debtor does not have sufficient funds to pay, even though they may be able to pay at some point in the future.

Question 3

How do you work out the amount unsecured creditors receive following liquidation?

Answer 3

Divide the total assets by total liabilities. = the amount every creditor should receive for each £ they are owed.
Multiply this figure by the amount owed.

Question 4

Who can a claim for wrongful trading be made by

Answer 4

Only a liquidator (they can assign this right to a creditor)

Question 5

When are CVA’s/ IVA’s binding?

Answer 5

When creditors with a value of no less that 75% consent it is binding on all non-secured creditors (not binding on secured unless they consent_

Question 6

What needs to be evidenced in a petition to wind-up?

Answer 6

That the company is balance sheet insolvent (the companies liabilities exceed it’s debts)

Question 7

What is the relevant time for a transaction at undervalue to a director?

Answer 7

2 years

Question 8

What is cash flow insolvent

Answer 8

The current assets are less than it’s current liabilities