Insolvency 0.0 / 5 ? LawBusiness LawUniversityNone Created by: jutnutCreated on: 07-07-17 16:50 Tests for insolvency under s.123IA 1986 Cash Flow and Balance Sheet Insolvency 1 of 15 Is it illegal to trade while insolvent? No, as long as directors have grounds to believe company has reasonable prospects of surviving. 2 of 15 What are the four types of creditors? Fixed charge holders, preferential, floating charge holders and unsecured 3 of 15 How much is the prescribed part? 50% of the first £10,000 and 20% of anything else Up to a maximum of £600,000. 4 of 15 In the insolvency pecking order who is at the bottom of the food chain? Shareholders 5 of 15 What is the first procedure to try in the event of insolvency? Informal negotiations outside any formal insolvency procedures 6 of 15 Which insolvency procedure is the company likely to survive? Informal negotiations, CVAs and administration 7 of 15 What are the three forms of liquidation? Members voluntary liquidation, creditors voluntary liquidation and compulsory liquidation 8 of 15 What is the first order of priority on liquidation? Liquidator’s costs and expenses of realising fixed charge assets 9 of 15 Which procedure(s) are largely contested? Administration 10 of 15 What are Antecedent Transactions? Where the administrator or liquidator will at the companies conduct before becoming insolvent. 11 of 15 What conduct are they looking for? Transactions at an undervalue, Preferences, Avoidance of Floating Charges, Fraudulent Trading, Transactions defrauding creditors and Wrongful Trading 12 of 15 What offence is most likely to stick Wrongful Trading 13 of 15 When is wrongful trading relevant? When a director continues trading and knew or ought to have known company has no reasonable prospects 14 of 15 What is the defence of wrongful trading? The director took every step with a view to minimising the potential loss to the company’s creditors…he ought to have taken 15 of 15
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