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Fourteen Liquidation Notes

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This is an extract of our Fourteen Liquidation document, which we sell as part of our Business Law and Practice Notes collection written by the top tier of Cambridge And Oxilp And College Of Law students.

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Core Module: BLP Paper A

Company Law - Private Limited Companies Liquidation

1. Liquidation Objective: to bring the existence of the company to an end and to distribute its assets to those entitled to them. [Can often follow administration where company cannot continue despite efforts in moratorium]. How:

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Appoint liquidator (qualified insolvency practitioner) Liquidator takes control of the company Collects assets [includes challenging certain past transactions in order to increase company assets - if necessary]
Pay off debts and distribute between members [in prescribed order]
Company is dissolved. Struck of register.

Types of liquidation Compulsory

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Member's Voluntary Liquidation
[M.V.L]

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Creditor's voluntary 1

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Imposed by court order Usually when company is insolvent Who to present petition: S.124 & 124A IA 1986 [company; directors; creditor or creditors; contributory (incl. members and former members - e.g. anyone liable to contribute to assets of company on winding up; Secretary of State (but only on grounds of public interest); any administrative receiver, administrator or supervisor of a CVA Grounds for the petition [e.g. unable to pay debts] See lecture slides (just and equitable etc) Court's discretion: Court can refuse to make winding up order even if grounds have been satisfied [e.g. majority creditors oppose winding up; or petition creditor is owed PS750 or less. Winding up order: Official Receiver becomes liquidator until permanent appointment of liquidator is made. Call meeting of creditors. All creditors can have their own nominee to replace official receiver as permanent liquidator. Creditors' nominee takes precedence. Commenced by resolution of company Directors make statutory declaration of solvency [S.89 IA 1986] - "the company is able to pay its debts in full within 12 months of commencement of liquidation" [COMPANY IS SOLVENT]
Director's liable to imprisonment / fine if they make declaration without reasonable grounds. Procedure: Shareholders Special Resolution to wind up [S.84 IA] and Ordinary Resolution to appoint liquidator [S.91 IA]. MVL can always be converted into a CVL if company becomes insolvent. COMPANY IS INSOLVENT Creditors begin the process - NO court order is required.

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