公司法和商法(双语)讲义-第23章Corporate-and-Business-Law-Chapter-23

公司法和商法(双语)讲义-第23章

Corporate-and-Business-Law-Chapter-23

23Insolvency

Overview

INSOLVENCY

Administration Liquidation

Compulsory Voluntary

Members Creditors

1 Insolvency of a company usually results in

liquidation either compulsory or voluntary.

Liquidation may be avoided by administration.

Liquidation may also be entered into whilst a

company is still solvent.

2 Administration orders

Purpose of administration

2.1 (a) The appointment of an administrator is

designed to give companies in financial

difficulty (usually with insolvency looming) a

“breathing space” from which to trade out of

their difficulties.

(b) Administrators may be appointed either by

the court, the holders of floating charges

created on or post 15.9.03 and the company

and its directors.

(c) If the company and its directors intend to

appoint an administrator they must give five

days notice to any floating charge holder

entitled to appoint either an administrative

receiver or administrator. This effectively

means that a floating charge holder can

either block the company’s choice of

administrator or block the administration

procedure.

(d) The administrator once appointed must

perform his functions with the objective of:

(i) rescuing the company as a going concern,

or

(ii) achieving a better result for the

company’s creditors than winding up; or (iii) realising property to distribute to

secured or preferential creditors. Consequences of the appointment of an administrator

2.2 (a) Winding-up cannot be commenced or

continued with.

(b) No goods can be recovered from the

company (e.g. H.P. repossessions) without

court leave.

(c) Legal proceedings can only be commenced

or continued with the court's permission.

Administrators proposals and powers

2.3 (a) The administrator should:

(i) Establish the state of the company’s

affairs by obtaining a statement of affairs.

(ii) Prepare proposals to achieve the aim of administration.

(b) A creditors meeting must be called within 10

weeks of administrators appointment.

(c) The meeting will

(i) accept;

(ii) accept with modifications which must be approved by the administrator; or

(iii) reject.

Powers

2.4 (a) The administrator has general powers of

management derived from..

(b) He can

(i) appoint and remove directors (a unique

power in company law normally only

available in an AGM)

(ii) call meetings of the members and

creditors

(iii) apply to court for directions regarding the carrying out of his functions

(iv) make payments to secured or preferential creditors and with the courts permission

make payments to unsecured creditors

(e) He must summon a meeting of the company’s

creditors if told to by:

(i) the court, or

(ii) 10% of the company’s creditors. s.17(IA) End of administration

2.5 (a) The administration has been successful.

(b) Automatically (unless extended) 12 months

after the date of appointment.

(c) By court order which includes the granting of

a winding up petition on public interest

grounds.

3 Liquidation

3.1 Liquidation may take one of two forms:

(i) Winding up by the court – Compulsory

liquidation.

(ii) Voluntary Winding Up –Members’ or

Creditors’.

Winding up by the court

3.2 (a) s.122(1)(IA) Reasons for which a company

may be put into compulsory liquidation:-

(i) The company has passed a special

resolution to that effect.

(ii) The company was regarded as a public

company on incorporation and not issued

with a s.117 certificate within 1 year.

(iii) The company does not start business

within one year of incorporation or

suspends business for one year.

(iv) The total number of members in a public company is reduced below the legal

minimum. (i.e., 2)

(v) The company is unable to pay its debts.

(vi) The court is of the opinion that it is just and equitable that it should be wound up.

(b) s.123(IA) "Unable to pay its debts" (Creditors

petition)

There are four ways of proving that a

company is unable to pay its debts:

(i) A creditor has served on a written

demand for ￡750 or more on the company,

and the company has failed to pay within

a period of 21 days.

(ii) A creditor has sued the company and obtained judgement but remains unpaid.

(iii) The company is insolvent on the "balance sheet test" (liabilities exceed assets) (iv) The company is insolvent on the

"commercial insolvency test" (i.e. it is

unable to pay its debts as they fall due

because it lack cash).

(c) s.122(1)g "Just and equitable" (members

petition)

Cases where the court has held that it is "just and equitable" to wind up include:-

(i) where the company’s main object has

failed: Re German Date Coffee Company.

(ii) where there is deadlock in the

management: Re Yenidje Tobacco

Company.

(iii) where a director of a "partnership

company" is removed under s.303:

Ebrahimi v. Westbourne Galleries

Members must stand to gain something from liquidation (the company must not be

insolvent).

(d) The court will appoint the Official Receiver as

liquidator (he will pass on the role quickly)

and encourage the formation of a liquidation committee.

(e) Compulsory liquidation is rare – most

frequently a hostile act from creditors.

Members’ voluntary wi nding up

3.3 (a) Company is solvent.

(b) Directors meeting at which it is resolved that

(i) EGM will be called;

(ii) members voluntary winding up be

recommended to the members;

(iii) statutory declaration of solvency sworn.

(c) Contents of the Statutory Declaration of

Solvency:

(i) Directors must declare that the company

will be able to pay its debts in full within

12 months.

(ii) It must be supported by a statement of

assets and liabilities as at the latest

possible date.

(iii) The declaration must be made within 5

weeks before the Special Resolution is

passed and must be filed with the

Registrar within 15 days of it being

passed.

(iv) Penalties: –If debts are not paid within

12 months it is assumed that the

directors had no grounds for

making the declaration.

–Directors can be fined and

imprisoned.

(d) Extraordinary General Meeting:

(i) Special resolution to wind the company

up under the members’ supervision,

s.91(IA).

(ii) Ordinary resolution to appoint a

liquidator.

(iii) Ordinary resolution to fix th e liquidator’s remuneration.

(iv) If the liquidator (at any time) feels the company will not be able to meet its debts

he must:

–summon a meeting of creditors

–present them with a balance sheet

–convert the winding up into a

Creditors’ Voluntary Winding Up.

s.95(IA).

Creditors’ voluntary winding up

3.4 (a) Directors meeting at which it is resolved that:

(i) EGM will be called;

(ii) creditors voluntary winding up be

recommended to the members;

(iii) meeting of creditors be called;

(iv) director to chair the creditors meeting

appointed;

(v) a statement of affairs be sworn.

(b) Shareholders' meeting:

(i) Extraordinary resolution (75%) to wind up

the company on the grounds it cannot

pay its debts is passed;

(ii) Ordinary resolution to appoint a liquidator is also passed.

(c) Creditors’ meeting:

(i) The company must call a creditors’

meeting within 14 days of the EGM;

(ii) Notice must be sent by post to creditors.

It must also be placed in the London

Gazette and two local newspapers.

(d) At the creditors’ meet ing the directors must

produce:

(i) A full statement of the company’s affairs

(ii) A list of creditors together with the

estimated amount of the claims.

Creditors and members nominate a liquidator;

the creditors’ choice prevails: s.100(IA)

(e) A Liquidation Committee may be appointed

which has three purposes:

(i) To assist the liquidator as a

representative body;

(ii) To keep an eye on him;

(iii) To give the liquidator permission to

exercise certain powers (e.g., paying off a

certain class) thus removing the need to

call a full meeting every time a decision is

made.

Overview

OTHER POINTS

Effect of Liquidator's Distribution

winding up powers of assets

Effect of winding-up

3.5 (a) All actions for recovery of debt against the

company are stopped. (Action in tort will

continue.)

(b) The company will cease to carry on business

except where it is necessary for the beneficial

winding-up of the company.

(c) Directors continue in office but are stripped

of power.

(d) Employees automatically made redundant but

can be re-employed.

The liquidator’s powers

3.6 (a) Selling the assets

The Liquidator may call in amounts due from

contributories and/or directors in some

circumstances:-

(i) Secret profits e.g., made by directors from

their position Regal Hastings v. Gulliver.

(ii) s.212(IA) Misfeasance: He can recover

money improperly retained by promoters,

directors, managers or officers of the

company.

(iii) s.213(IA) Fraudulent trading: Where a

business has been carried on with intent

to defraud creditors in a winding up.

(iv) s.214 (IA) Wrongful Trading: Where a

director of the company knew or ought to

have concluded that there was no

reasonable prospect that the company

would avoid going into insolvent

liquidation and did not take every step

with a view to minimising the potential

loss to the company’s creditors he may

be ordered by the court to contribute to

the company’s assets.

(b) The liquidator can apply to the court to avoid:

(i) transactions at an undervalue (2 years)

(ii) preferences (6 months, 2 years if

connected).

(iii) floating charges created in last 12 months if company insolvent at time; or no new

consideration given.

Distribution of assets

3.7 Order of payment

(i) Cost of winding up –cost of realising assets,

liquidator’s remuneration, cost

of making statement of affairs,

expenses of committee of

inspection.

(ii) Fixed charges.

(iii) Preferential debts.

(iv) Floating charges.

(v) Unsecured ordinary creditors. These

creditors will also share in a proportion of the

net assets secured by floating charge if it was

created on or after 15.0.03.

(vi) Deferred debts (e.g. declared dividends).

(vii) Shareholders.

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