Topic 10 - Saving or Ending the Corporation Flashcards
(24 cards)
What are the different types of Corporate Insolvency Regimes
- VA
- Deed of Company Arrangement (DOCA)
- Restructuring and restructuring plans
- Liquidation
What is ‘Receivership?’
- Registered liquidator appointed to take control of company to sell assets and pay back creditors
What is a Receiver’s powers?
- Take control, sell property and then pay back creditor
Is a receiver an AGENT for company?
YES –> repudiates contract if not beneficial for liquidators
Who does the Receiver owe duties to?
Primarily Creditor AND Company to act in their best interests
If there is a receiver, do directors still stay in office?
YES
When is there termination of Receivership?
- Debt is repaid
- Receiver’s objectives not met
- Company NOT in liquidation
- Courts can terminate
What is VA?
- Maximise chances of company survival and provide better return to creditors
Who initiates VA?
- Directors, Liquidators or Creditors
What is the Role of Administrator?
- Take control of company and must be registered liquidator –> reports to creditors
What is Deeds of Company Arrangement?
- An outcome of VA –> aims to save company or provide better return for creditors
–> If creditors approve, then VA ceases and DOCA becomes valid
What is a Moratorium
Extra time to pay pre-VA debts whilst trading
Why may Creditors agree to a DOCA?
- DOCA may have better return than liquidation
Limitations of VA?
- Too costly for small businesses
What are the upsides of ‘Reconstruction for Small businesses?’
- Efficient and allows company to stay in business whilst paying back debts
What are conditions for Reconstruction Process?
- Less than $1mil in liabilities
What are some conditions before Restructuring can be initiated?
- Employee entitlements have been paid
- Tax compliant
- Pre-restructuring debts
Whose in charge of company b/w Director and Practitioner?
Director
3 Types of Liquidation?
- Compulsory –> Due to debts
- Voluntary –> Creditors and Shareholders voluntary winding up
- Simplified –> For small companies
In liquidation, are shareholders or creditors paid first?
Creditors
What is Good Faith Protection to outsiders who have a contract with companies whom have just winded-up?
- Outsiders who act in good faith whereby they
- Did not suspect insolvency
- Good consideration
What is a Schemes of Arrangement?
- BINDING compromise or reorg of company’s obligations
Is a Scheme of Arrangement more complex than VA?
YES –> Much less time efficient
Will a scheme override constitution?
Yes –> But if affects class rights without proper protection, then its invalid
