This is an extract of our Insolvency Crib Sheet 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.
The following is a more accessble plain text extract of the PDF sample above, taken from our Business Law and Practice Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
1. Is the balance sheet accurate a. Check date a.i. Does it pre-date any more recent discoveries that would inflate or deflate the balance sheet values b. Is there the potential of any bad debts?
b.i. Is there a provision for bad or doubtful debts in the balance sheet?
2. Is the company insolvent?
a. 122(1)(f) IA 1986 company will be insolvent if it is unable to pay its debts a.i. Is the company balance sheet insolvent?
a.i.1. 123(2) is the value of the company's assets less than the amount of its liabilities, taking into account contingent & prospective liabilities?
a.i.1.a. APPLY TO FACTS a.ii. Has the company "reached the point of no return"?
a.ii.1. BNY Corporate Trustee Services v Eurosail UK a.iii. Is the company cash-flow insolvent a.iii.1. 123(1)(e) is the company unable to pay its debts as they fall due?
a.iii.1.a. APPLY TO FACTS a.iv. 123(1)(a) is a creditor owed more than PS750, and has he served on the company a written demand requiring the company to pay the sum due, and has the company neglected to pay the sum for 3 weeks?
a.v. 123(1)(b) Has a creditor obtained judgment against the company & attempted to execute the judgment, & is the debt still unsatisfied in part or full?
3. What can creditors do?
a. Petition for Company's Compulsory Liquidation a.i. Prove company is insolvent as defined by 122 IA 1986 a.i.1. Court makes winding up order - Official Receiver appointed as liquidator a.ii. 129(1) winding up of the company by the court is deemed to commence at the time of presentation of the winding up petition a.iii. 103 Directors will be dismissed a.iv. Costs of winding-up have to be borne out of the company's assets reducing the amount of the funds for creditors b. Force the directors to commence a creditors' voluntary liquidation b.i. 84(1)(b) special resolution of members to wind company up voluntarily b.i.1. SEE FLOW CHART FOR DETAILED PROCEDURE c. Apply for an administration court order by the company c.i. Administrator has a duty to try to achieve one of 3 statutory purposes para 3(1) Sch B1 c.i.1. (a) rescue company as a going concern c.i.2. (b) Achieving better results for company's creditors as a whole than would be likely if company were wound up c.i.3. (c) realising property in order to make a distribution to one or more secured/ preferential creditors d. Is there a floating charge?
d.i. Created before 15 September 2003 d.i.1. Appoint an administrative receiver if company has defaulted on the loan e. If QFCH then can follow out-of-court route for pushing the company into administration e.i. Also can follow this route if have ability to appoint an admin receiver 14(2)(c) e.ii. Administrator's first priority is rescue of the company as a going concern para 3(1) Sch B1 but creditor can choose appointment of administrator f. If fixed charge then can appoint an LPA receiver
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