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Questions and Answers
Which type of winding up occurs when a company is solvent and the directors declare solvency?
Which type of winding up occurs when a company is solvent and the directors declare solvency?
What is the primary role of a liquidator during the winding up of a company?
What is the primary role of a liquidator during the winding up of a company?
Which statutory option involves a formal arrangement between a company and its creditors?
Which statutory option involves a formal arrangement between a company and its creditors?
Under which section do the director's powers cease upon the appointment of a liquidator?
Under which section do the director's powers cease upon the appointment of a liquidator?
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What is the outcome for a company once the liquidation process is complete?
What is the outcome for a company once the liquidation process is complete?
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What is the primary statutory purpose of administration under Part 3(1) of Schedule B1 to IA 1986?
What is the primary statutory purpose of administration under Part 3(1) of Schedule B1 to IA 1986?
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Under what condition can an administrator pursue objective (b) instead of (a)?
Under what condition can an administrator pursue objective (b) instead of (a)?
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What effect does an administration have on a company’s business documents?
What effect does an administration have on a company’s business documents?
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Which of the following is a requirement for proposing a Company Voluntary Arrangement (CVA)?
Which of the following is a requirement for proposing a Company Voluntary Arrangement (CVA)?
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What is the minimum percentage of creditor support required to approve a CVA?
What is the minimum percentage of creditor support required to approve a CVA?
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In which scenario is an out-of-court administration appointment NOT possible?
In which scenario is an out-of-court administration appointment NOT possible?
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What happens during the moratorium period of a CVA?
What happens during the moratorium period of a CVA?
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What must happen for a CVA to come to an end prematurely?
What must happen for a CVA to come to an end prematurely?
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What is the primary role of the qualified insolvency practitioner as a nominee in a CVA?
What is the primary role of the qualified insolvency practitioner as a nominee in a CVA?
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Which condition is NOT required for a company to enter an administration process by court?
Which condition is NOT required for a company to enter an administration process by court?
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Study Notes
Corporate Insolvency Options
- Winding-up (Liquidation): Process ending a company's existence, resolving its affairs. Company ceases to exist after liquidation.
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Types of Winding-up:
- Compulsory: Court-ordered.
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Voluntary:
- Members': For solvent companies, directors declare solvency.
- Creditors': For insolvent companies.
- Liquidator's Role: Collect, sell assets, distribute proceeds to creditors, surplus to entitled parties. All director powers cease upon appointment. Handles disputes, sells assets, investigates issues, removes from register.
- Administration: Statutory process aiming to rescue or improve creditor situation.
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Administration Objectives:
- Rescuing as a going concern.
- Better creditor result than liquidation.
- Realizing assets for secured/preferential creditors.
- Administration Criteria: Functions in creditors' best interest, prioritize objectives, act quickly. Administrator prioritizes rescue pursuit unless impractical or another objective is better for creditors.
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Administration Initiation:
- Court: Petition by company, directors, or creditors if unable to pay debts.
- Out of Court: By a qualifying floating charge holder or by the company if likely unable to pay.
- Administration Effects: Company under administration, fact on all documents. Administrator controls, directors cooperate. Moratorium: creditors cannot enforce security or pursue legal action against the company during administration
- Company Voluntary Agreement (CVA): Arrangement between company and creditors to avoid liquidation.
- CVA Nominee: Qualified insolvency practitioner who monitors company affairs, forming professional judgment regarding proposal viability.
- Small Eligible Company Moratorium: 28 days for companies under certain turnover, balance sheet total, and employee conditions.
- CVA Approval: 75% of unsecured creditors approve. Secured/preferential creditors' rights protected. Members must also approve (ordinary resolution).
- CVA Supervision Transition: Nominee becomes supervisor after implementation.
- CVA Termination: Completed implementation, or premature termination due to non-compliance which could lead to liquidation.
- CVA Pros/Cons: Maintaining director control. Limited applications due to secured creditor requirements.
- Moratorium: Statutory period halting enforcement action by specific creditors. Allows breathing room to rescue company.
- Restructuring Plan: Court-supervised arrangement with creditors, shareholders, or class of them. Intended for companies experiencing or likely to experience financial difficulties. A more powerful, flexible form of arrangement than a scheme.
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Description
Explore the various options available for corporate insolvency, including winding-up processes and administration. Understand the roles and responsibilities of liquidators and the objectives of administration. This quiz will test your knowledge of the intricacies of corporate insolvency and the decision-making involved.
