Insolvency Flashcards
(26 cards)
What is a CVA
compulsory voluntary agreement
75% creditors and 50% unconnected
binding if unsecured
if secured agreement needed
What is administration
Rescues the company and provides a better result for creditors as a whole
Realise assets
Out of court route - moratorium
Court route - is unable to pay
Out of court route for administration
This process requires:
Filing a notice of intention to appoint an administrator at court
Serving notice on any qualifying floating charge holder (QFCH)
Filing a statutory declaration that the company is unable to pay debts and not in liquidation
=
imposes statutory moratorium freezing creditors for 1 year
court route for administration
if the company is unable to pay their debts
What are the different types of liquidation
compulsory
members
creditors voluntary
compulsory liquidation
creditor serves statutory demand
21 days
winding up order
members voluntary liquidation
solvent companies
special resolution
creditors voluntary liquidation
agreement between creditors, directors, company , shareholders
special resolution
what is recievership
fixed assets
secured creditor who sells the asset collecting the income
pass the cash flow test
at the time [current assets> liabilities]
pass the balance sheet test
at the time [overall net assets>overall net liabilities]
if creditors judgement to a company has not been paid in full, then what can they serve on the company
a statutory demand for 750£+ to be paid within 21 days
Personal insolvency - individual voluntary arrangement
apply for 14 day interim order offering legal protections [landlord cannot forfeit, no bankruptcy]
agree to voluntary repayment plan
what does a ‘Personal insolvency - individual voluntary arrangement’ bind:
75% creditor agree
binds unsecured
who is bankruptcy initiated by?
- creditors owed £5000 +
- debtor showing own bank statement ‘help im poor’
creditors owed £5000 - show that the bankruptcee…
- cannot pay and no reasonable prospects to pay
- failure to comply with stat demand 21 days
bankruptcy process steps 1-4
- bankruptcy order
- trustee in bankruptcy takes control of assets
- trustee sells assets to the creditor bar everyday items
- trustee can sell fam home with court order [1year after]
order assets sold in bankruptcy
- fixed charges
- liquidator
- preferential
- rest of fixed and unsecured assets
Order of Distribution (Insolvency Act 1986, s.328 & Sch 6):
Costs of the bankruptcy
➤ Includes trustee’s fees and expenses
Preferential creditors
➤ Includes certain HMRC debts (like VAT) – secondary preferential creditor
Ordinary unsecured creditors
➤ All other unsecured creditors, including business debts and bank overdrafts
Postponed debts
➤ Rare, e.g. interest after bankruptcy order
can you obtain more than 500£ when bankrupt
not without disclosing that you are bankrupt
what can you not do when you are bankrupt
form, manage or promote a company
be in a partnership
preferences
connected = 2 years before insolvency
unconnected = 6 months before insolvency
[company insolvent at the time or insolvent as a consequence]
However, the company might rebut the presumption by proving it was the only way to raise urgent funds and not motivated by preference desire to prefer.
What is the time limit for a trustee in bankruptcy to challenge a transfer at an undervalue, and how does it differ for connected and non-connected persons?
To a connected person (e.g. spouse, relative):
Trustee can challenge transfers made within 5 years before the bankruptcy petition — no need to prove insolvency at the time.
To a non-connected person (e.g. friend, business associate):
Trustee can challenge transfers made within 2 years — but must prove the bankrupt was insolvent at the time or became insolvent as a result.
floating charge granted later
connected: within 2 years insolvency
unconnected: 12 months insolvency
defence: good faith
what is wrongful trading
- company goes insolvent
- directors knew or ought to know that no reasonable prospect that the company could avoid it.
