Liquidation - general

Question 1

what is liquidation?

Answer 1

the process by which the company is brought to an end. Assets are realised and the proceeds are distributed to those entitled.

Question 2

what is the liquidator’s role?

Answer 2

o Secure and realise assets + pay creditors (with any surplus being paid to SHs)
o Investigate the company’s affairs (inc. issuing proceedings if necessary)

Question 3

which entities can be liquidated?

Answer 3

companies and partnerships can be wound up as unregistered companies

Question 4

in what order are assets distributed?

Answer 4

1. Fixed charge holders
2. Moratorium debts + priority pre-moratorium debts
3. Administration/liquidation expenses
4. Ordinary preferential creditors
5. Secondary preferential creditors
6. Floating charges
7. Unsecured debts
8. Members

Question 5

what are moratorium and priority pre-moratorium debts?

Answer 5

• Moratorium debts = debts incurred during the moratorium period
• Priority pre-moratorium debts = inc. wages, redundancy

Question 6

explain ring-fencing and when this applies

Answer 6

if the floating charge was created on/after 15 September 2003, part of the money realised from selling the assets is set aside for unsecured creditors:
o Property value less than £10k = 50%
o Property value over £10k = 50% of £10k + 20% of remainder (capped at £600k for charges crease pre-2020 and £800k post-2020)

Question 7

how are creditors paid?

Answer 7

creditors will rank within their category equally and abate equally, with the exception of fixed charge holders