Liquidation - compulsory liquidation Flashcards
(12 cards)
explain this type of liquidation
the company is wound up by the court when it is insolvent
on what grounds can the court wind a company up?
s.122 sets out 6 grounds upon which the court can wind up the company. Most common:
o The company is unable to pay its debts (see: s.123 IA); or
o The court is of the opinion it is just and equitable
when will a company be unable to pay its debts?
o Cash flow test
o Balance sheet test
o It fails to satisfy a statutory demand
o A judgment debt remains unsatisfied (in full or in part) after enforcement
o It is otherwise proved the company can’t pay its debts as they fall due
explain the cash flow and balance sheet tests
o Cash flow test = it is unable to pay its debts as they fall due (inc. current debts + foreseeable debts) i.e. owes £50k. Has £500k in assets but only £2k in cash and no immediate way to raise funds = would fail cash flow test
o Balance sheet test = liabilities (inc. future/potential liabilities) exceed its assets
explain the statutory demand requirements
creditor served demand of at least £750 and it hasn’t been paid/agreement reached within 21 days
what are the 7 key stages?
- petitioner presents WUP at court
- petitioner serves sealed WUP
- petitioner must publish a notice in the Gazette
- hearing
- post-WUP order administration
- winding up
- concluding winding up
who can present a WUP petition and who must it be served on?
Petition can be presented by (non-exhaustive):
Creditor (most common)
Liquidator/administrator
Ds of the company
WUP to be served on:
The company
Any voluntary liquidator, administrator, CVA supervisor
what are the Gazette notice requirements? what is the purpose of the notice?
Must be published at least 7 days after service on the company + at least 7 days before the hearing (failure = WUP dismissed or hearing adj. to comply)
Interest parties can attend the hearing + state if they support/oppose WUP
what must the company do if they oppose an order being made?
Company must f&s a w/s 5 business days before the hearing if it opposes
who has the right to speak at the hearing and what orders can the court make?
Petitioner, creditors, company + SHs have the right to speak
The court can:
Dismiss WUP
Adjourn hearing i.e. if company indicates it can pay in a reasonable time
Make a winding-up order, interim order, or any other order it sees fit i.e. court may issue directions if the debt is disputed/there’s a cross claim
what are the post-winding up order requirements?
o OR becomes the liquidator on date of the order + D’s powers cease
o A private liquidator can be appointed if OR seeks nominations from creditors
o Court sends a sealed order to OR as soon as reasonably practicable
o OR sends a copy of the order to the company and ROC
o OR publishes a notice of the order in the Gazette
o OR can request statement of affairs from company (to be provided within 21 days)
what steps take place when concluding winding up?
OR = sends notice + statement of payments to ROC
Private liquidator = same process as concluding under voluntary liquidation
