BL 2 Flashcards

Question

Filing requirements after allotment of shares

Answer 1

- any CAP resolutions (even if ordinary) to CH in 15 days (5 letters in allot) - SH01 in 1 month (01 - 1) - Prepare share certs - 2 months - Register of members / PSC if required - 2 months

Answer 2

None / pre-emption rights don't apply But check articles - can impact remaining SH's ability to block resolutions etc E.g.: - may say need to offer to existing shareholders first

Answer 3

No But under MA, board discretion whether to add to register If never register, new shareholder will only be beneficial owner (transferor = legal) Between transfer and registration: only legal owner can attend GM and receive dividends HOWEVER : - at GM vote in accordance with transferee (beneficial's) interests - pay dividends

Answer 4

Transferor: - complete and sign stock transfer form and give to transferee - give transferee share certificate Transferee: - sale price over £1k and not a gift, pay stamp duty - send share cert and stock transfer form to company

Answer 5

- send new shareholder new **share certificate** in their name within **2 months** - enter their name on **register of members** within 2 months - notify registrar of change in ownership when files annual **confirmation statement** (Cs01)

Answer 6

- shareholder dies, automatically pass to PRs - shareholder bankrupt, automatically vest in trustee in bankruptcy Effect: - don't become shareholders but entitled to dividends - can choose to be registered as shareholders (subject to company agreeing) and sell - or sell in capacity as PR/trustee

Answer 7

Money provided by shareholders in return for shares

Answer 8

Share capital fund (money shareholders have put in in return for shares) cannot be reduced (cos creditors use this fund for debts) (there are exceptions)

Answer 9

- can't return paid-up share capital to shareholders or reduce the amount they owe if not paid all yet - can't pay dividends out of capital - company shouldn't purchase own shares (there are defo exceptions)

Answer 10

- share buyback if: a) correct procedure followed b) after court order if unfairly prejudiced minority shareholder - can return capital to shareholders **AFTER payment of its debts** in a winding up

Answer 11

- shareholder can't find a purchaser - not enough shareholders would support special resolution to transfer (if articles required)

Answer 12

Ordinary resolution authorising the contract

Answer 13

Shares are cancelled And since company pays for shares, financially worse off Means: - Less profits available for dividends (bcos spending money on shares) - Less capital for any creditors if can't pay debts - Less capital for shareholders (after payment of debts) if wound up

Answer 14

duty best interests / duty care skill attention since financially worse off (pay for it and shares cancelled) usually justify in long-term interests if disgruntled shareholder but hard to justify if just cos no one wants to buy

Answer 15

Must check if: - permitted by articles - shares fully paid - amount of available profits

Answer 16

accumulated realised profits less accumulated realised losses

Answer 17

Cancel shares Update register of members and if required PSC register Within **28 days** of completion file with Registrar: - *purchase of own shares* - SH03 - notice of *cancellation* Keep: - minutes - written resolutions - copy of contract ^ at registered office for *10 years*

Answer 18

at time of purchase

Answer 19

No - written resolution: can't vote - GM: can vote but resolution not passed if their votes made the diff so they should not vote

Answer 20

1. does it have enough distributable profits? - even if is, consider if will be used for anything else? 2. if not enough cash, can pay via capital - check articles - must have exhausted profits - and there are conditions (sep queue card)

Answer 21

Board: - approve draft contract and decide how to finance Shareholders: - OR Board: - resolve to enter contract - one or 2 Ds authorised to execute

Answer 22

- public companies not allowed - private only if: 1. articles don't forbid 2. priv only if exhausted distributable profits

Answer 23

(as well as OR to approve contract / other conditions where not out of capital) 1. prep accounts no earlier than 3 months before the s of s 2. BM to approve contract / finance / approve s of s and report 3. contract available to members (15 days or with WR) 4. director's statement of solvency - no earlier than **1 week** before GM - that will remain solvent for **1 year** following buyback 2. **auditors** report - D's report not appear unreasonable 3. copy D's and auditor's statements attached to WR or at GM 4. special resolution (in addition to ordinary resolution to approve buyback contract) - that shareholder can't vote if WR and invalid if makes diff in GM

Answer 24

If company buyback, statement that solvent and will be for year following buyback If then becomes insolvent, **seller** of shares and **directors** may be required to **contribute** to losses Directors may face **criminal sanctions** if statement unreasonable

Answer 25

within 7 days SR passed London Gazette, stating: - SH approved payment out of capital - amount used - date of SR - where D/A's statements avail to inspect - right of creditors to apply for order preventing buyback within 5 weeks of SR passed ALSO: - publish equivalent notice in appropriate national newspaper; OR - notice to each creditor

Answer 26

5 - 7 weeks of special resolution so got a 2 week window by time given notice to creditors bcos only if no creditors object within 5 weeks to notice can board pass resolution

Answer 27

No earlier than 3 months before directors prepare statement of solvency (to check available profits / confirm fully paid) *i.e. don't prepare 4 months before statement, you could prepare 2 months before - makes sense. more accurate reflection.*

Answer 28

- company's articles to see if limit on power to buy back shares - no earlier than 3 months before statement solvency, prepare accounts to check : a) available profits b) shares fully paid

Answer 29

- decide method of finance - approve statement of solvency and auditors report - approve terms of purchase make contract or memorandum available to members (circulate with WR or available at registered office 15 days before GM) SS and AR signed no earlier than 1 wk before GM/passing of WR

Answer 30

File SoS and AR at CH before or at same time as Gazette Gazette 7 days File SR within 15 days of GM/WR Keep SS and AR at registered officer 5 weeks from SR (same as other share buyback requirements)

Answer 31

5 weeks after SR

Answer 32

1. inc in value of company (eg if got for £1 and company worth £100k, then if company becomes worth £150k, will be worth £1.50 2. dividends if have available profits (ie AR profits less AR losses), company CAN pay them to shareholders - directors decide whether to recommend and shareholders ordinary resolution to approve

Answer 33

1. Loans - usually from bank or owners/directors/shareholders - eg bank overdraft 2. Debt securities - IOUs - issued by company to investor in return for cash payment Both have to be repaid (different to securities)

Answer 34

- authorised under constitution - nothing to prevent in MA for private companies - pre Oct 2009: check memorandum May need special resolution to change articles/memorandum and remove restrictions - Ds must have authority (no issues under MAs)

Answer 35

no restrictions in their own partnership agreement (dont appear to be any PA 1890) unanimous consent to amend PA

Answer 36

1. overdraft facility 2. term loans 3. revolving credit facilities

Answer 37

contract between business and bank temporary loan to cover business expenses when no other money available bank may demand payment immediately without notice (aka uncommitted facility) business will pay fee and bank charge interest usually unsecured

Answer 38

base rate generally on compound basis i.e. unpaid interest added to capital (ie amount borrowed) and then interest charged on whole amount this is implied into contracts unless agree otherwise

Answer 39

borrows fixed amount, usually from a bank, for a specified period (ie term), at the end of which it must all be repaid. pay interest at regular intervals ---I----I----I---- Typically used to purchase assets eg machinery

Answer 40

Secured or unsecured - usually secured Bilateral or syndicated bilateral = two parties syndicated = multiple lenders - usually where high risk so not just one lender that carries risk

Answer 41

in one go or in instalments instalments means reduced interest payments (seems diff to revolving where can reborrow and borrow throughout the period - more flexible)

Answer 42

greater certainty re when pay back borrower has greater control - bank can only request repayment under terms

Answer 43

Bank agrees to make a maximum amount available throughout an agreed period Can borrow and repay **during** the period Interest at regular intervals (same as term) ---I----I----I-- Can reborrow amounts already repaid (that is why REvolving)

Answer 44

A) yes - as long as doesn't exceed overall maximum figure B) no (disadvantage of term loans) Reborrow begings with R so does revolving

Answer 45

can reduce interest payable by reducing borrowings those whose income NOT evenly distributed throughout the year (because can borrow when low and repay within that term) Flexibility to draw and repeay - which limits interest payable

Answer 46

expensive to negotiate If funds needed for single acquisiton, use term loan ^ since can access funds when it is ready and loan repayable according to agreed repayment schedule

Answer 47

Revolving credit facility Term loans

Answer 48

- amount of loan - currency 💰 - type of loan (term or revolving) - **availability period** to take loan (for revolving, this will be entire length of facility)

Answer 49

Provide with loan money when business requests

Answer 50

Overdraft - whenever and no notice Revolving credit facilities and term loans - in accordance with terms. ^ Typically: 1.Bullet payment = in one go 🥊 2. Amortisation = equal instalments over term o...o....o 3. Ballon = **unequal** instalments and last is largest o...O...**O** Revolving repayments will be towards end Term will be more evenly spread

Answer 51

- parties agree - may be fixed or variable - lenders will want default interest for missed payment but penalty clause so can cause probs

Answer 52

Bank and business 1. Limitation of dividends (so don't exceed certain amount) 2. **Minimum capital requirements** (**current** assets exceed liabilities) 3. No disposal of assets w/o consent 4. No change type or nature of business w/o consent 5. No further security over assets 6. Provision of info on business e.g. accounts

Answer 53

maybe by trade usage - eg bank's right to charge interest court limited power imply - just if so obvs goes w/o saying - can't be inconsistent with express term

Answer 54

Terms which if breach, lender may **terminate** agreement e.g. failure to pay sum due

Answer 55

(NOT a separate form of debt finance - its a type of debt finance) Usually loan agreement that is **registered** at CH Which gives lender **security over** borrowers **ASSETS** in return for loan Companies and LLPs only (so it's like a registered secured loan)

Answer 56

Lender with security can claim secured assets of company If business insolvent, better position that unsecured creditors who generally don't have rights of priority over business's assets Unsecured debts pro rata reduced if insufficient funds to pay all business debts

Answer 57

Debt finance **less risky** for investor - loans are a liability so **paid before dividends** - often **secured** over property - may be **personal director guarantees** ^ means more likely repay if insolvent Equity finance riskier for investor - will **lose capital** value of shares if insolvent - no guaranteed right to **dividends**

Answer 58

equity - don't repay shareholder's capital (ie initial investment into company) unless wound up - although may sell shares to make money debt - must repay, sometimes on demand (nb i checked and debt loan is a form of capital)

Answer 59

Shareholders - transfers restricted by **articles** which usually restrict freedom to sell - under MA, directors can refuse to **register** Lender - can sell its debenture to a **TP** if wishes (if want repayment of capital earlier than repayment date agreed) - company cannot restrict right to sell, regardless of articles

Answer 60

Lenders: - capital value generally remains same (ie value of loan) - get money from interest payments (income) Shareholders: - dividend (income) - often invest in hope shares increase in value - i.e. capital appreciation ^ rather than relying on income by way of dividend income

Answer 61

according to terms of agreement even if no profits available, must use capital if doesn't, lender **may be able to appoint receiver** or **administrator** to enforce terms of the debenture

Answer 62

Debt Equity governed tightly by CA 2006 Whereas debt = contract law

Answer 63

Dividends NOT deductible expense pay after corporation tax INTEREST on debentures trading expense since incurred for purposes of trade (debt better for tax because cost to business is interest, which is tax deductible) (unlike shares where cost for business is the returns company paid to shareholders - which is not tax deductible) **tbf seems fair because otherwise would just pay yousrelf loads of dividends and no tax would ever get paid lol**

Answer 64

Equity By fresh issue of shares

Answer 65

(i.e. security over assets in return for loan) Because if fail to repay loan as agreed, lender can seize assets, sell them and pay self out of proceeds. So lowers risk of not being repaid.

Answer 66

:) Lender usually allows to borrow at lower rate :( must accept restrictions **on use** of assets given as security

Answer 67

CA 2006 = charge used as umbrella term for **most types** of security. specifically states that this inc mortgages. LPA 1925 = mortgage umbrella term for security, defined as charge or lien over **PROPERTY** Insolvency Act = any mortgage, charge, lien or other security (check which legislation you are using at outset since varies)

Answer 68

can only be granted fixed charges and must be registered at Land Registry if over land

Answer 69

CA 2006 / MA = - no restrictions for private companies - directors have authority to enter security contract on company's behalf (unless amended articles) Pre 1 Oct 2009 - check that company's memorandum If there are restrictions: - special resolution to amend articles.

Answer 70

check no restrictions on company and Ds authority by: - **articles**, companies **CH** records and requesting relevant **board** resolutions - sufficient **value** in property for loan - **charges** registered at CH and Land Registry / Intellectual Property Office if apt - **winding-up search** by telephone at Companies Court to check no insolvency

Answer 71

1. mortgages (highest form) - legal ownership transferred to lender - right to immediate possession and sale 2. fixed charges - separate over each asset - keep in good condition and permission to dispose - right of sale and to proceeds before others - can have multiple over one asset - not legal 3. floating charges - equitable over whole class of assets (ie stock) - assets constantly changing - don't need permission to deal with unless crystallizes

Answer 72

Automatically crystallises - i.e. turns into a fixed charge over particular assets Chargor (company) then can't deal with w/o consent - if: 1. receivership (charging doc may say when receiver can be appointed, no need to be insolvent) 2. liquidation 3. ceases to trade; or 4. any other event specified in charge document (eg failure to pay)

Answer 73

1. Fixed = priority over sale proceeds (floating gets any remainder) 2. company could sell stock and not replace, so wouldn't have a charge over anything 3. preferential creditors take priority 4. liquidator/administrator can apply to remove floating charge

Answer 74

form of security gives creditor right to physical possession of debtor's goods or assets until they have paid debts no right to sell eg right to retain van until repairs paid for (keep the keys)

Answer 75

directors give for loan so if lender can't recover loan in full from company/LLP may take from their personal assets

Answer 76

asset physically delivered by debtor to creditor to act as security right of sale if sufficient notice given

Answer 77

on sale of goods, buyer doesn't get full title to goods until pay full price to seller. if buyer defaults, goods repossessed by seller.

Answer 78

1. Security - form (fixed/floating/lien etc) - over what assets 2. Representations and warranties - re the assets eg warrants that free from other charges 3. Covenants - ensure value of assets maintained 4. Enforcement - circumstances where security enforceable -lender's powers e.g. sale

Answer 79

Debentures = loan agreement registered at CH, which gives security over assets (companies/LLPs only) - Board resolution usually enough to authroise both the borrowing and grant of security - May be issued with directors counting in quorum - eg giving personal guarantee - check articles and get shareholder decision either suspending (OR) or amend articles (SR)

Answer 80

Voluntary But if don't, may become void against other creditors/liquidators/administerators Lose priority and treated same as unsecured creditors But company still liable to repay

Answer 81

Company or any person '**interested**', including company and CHARGEHOLDER With CH 21 days Statement of particulars (form **MR01**), **fee** and copy of the **agreement** (mr charge)

Answer 82

Certificate of registration, to person who delivered the application

Answer 83

Form MR01 and copy of charging document (eg contract)

Answer 84

Form MR01 and copy of charging document Registered office Criminal offence, but charge remains valid

Answer 85

(re-cap: 21 days to register) Charge is **void** against **TPs** Treated as if **unsecured** Court can (rare): A) extend 21 days if - **accidental**; or - would not **prejudice** shareholders/other creditors **BUT** any other charges registered in mean time would have **priority** B) allow **rectification** or **replacement** document if incorrect details/doc

Answer 86

sign and complete MR04 registrar will put statement of satisfaction on file no but good practice

Answer 87

person with interest in registration of charge (eg director) sign completed MR04 Register statement at CH that released/no longer belongs May need to remove from LR too

Answer 88

If **registered**: 1. Fixed charge or mortgage priority floating of same asset, even if floating was created first 2. Multiple fixed or mortgage over same asset, priority in order of date of CREATION (**not** registration - but assuming were registered in 21 days) 3. Multiple floating charges over same asset, date of **creation** (not registration - but only if both are properly registered) 4. If **floating** charge has **negative pledge**, same priority levels as fixed charge / if fixed has actual knowledge, will rank behind 5. If fixed charge not registered on time, ranked below floating charge holders (even if floating charge created later) BUT creditors can enter agreement between themselves to alter priority (ie subordination) (consolidate task 3 unit 5 helps if stuck)

Answer 89

Creditors can enter agreement between selves to alter priority Agreement = deed of priority e.g. holder of fixed charge allowed bank priority for floating charge because bank not grant without and borrower needs to continue trade

Answer 90

Clause Prohibits company from creating later charges with priority (eg fixed/mortgage) to floating charge without permission Future lenders with actual knowledge of the clause will not have priority.

Answer 91

MR01 and clause included in copy of charging document (CH) Can't argue had constructive knowledge because was on MR01 Need to have searched CH docs and seen charging doc - then they will have actual knowledge and no priority Subsequent charge holder may also be liable for** tort of inducing breach **of contract So should contain covenant that there are no earlier charges subject to negative pledge clause - then otherwise company borrower in breach and can terminate

Answer 92

- affixing its seal, (if MA I think) signed by at least one authorised person in presence of a witness who attests; or - signatures of two authorised people (direct/secretary); or - director in presence of a witness who attests *if * *contrasts with contracts - **no need for witness if seal or 2 signatures if authorised** - can be entered into using company seal or on behalf of company by person acting under its express or implied authority - director or could be another employee who enters into contracts as part of role*

Answer 93

disciplinary action not legally binding !

Answer 94

The profits that it earns from trading or offering its services eg fees for legal services

Answer 95

Items business paid for and which will benefit from for a short time e.g. gas, stock bought for resale

Answer 96

What business owns or has right to own Usually longer-term benefit that expenses eg business premises if own them, machinery, money owed to business

Answer 97

What business owes e.g. amount unpaid on loans

Answer 98

Final account, which is made up of: A) the profit and loss account B) the balance sheet

Answer 99

Day-to-day profitability by: Income - Expenses = Profit **Does not consider assets or liabilities** income = e.g. legal fees. expenses = short-term eg gas. (would not say CR/DR - just one section for income and one for expenses. see one note for pic)

Answer 100

What business is WORTH, by: Assets - Liability = Net worth SPLIT INTO TWO SECTIONS: - assets and liabilities covered within them: 1. Employment of capital - **i.e. where £ is** assets - liabilities owed to THIRD PARTIES e.g. in bank account/premises Structured as: FIXED ASSETS CURRENT ASSETS LESS CURRENT LIABILITIES NET CURRENT ASSETS LESS LONG-TERM LIABILITIES NET ASSETS 2. Capital employed **i.e. where £ came from** OPENING BALANCE (members initial contribution) NET PROFIT (cos that is free to spend) DRAWINGS - in (brackets) - money owner taken out

Answer 101

Annually - end of accounting period

Answer 102

Contains ALL (!) DR and CR entries for ALL ledgers (income, expenses, assets, liabilities) (info from here used for profit/loss and balance sheet) So like an overall total Prepare before final accounts Imp - should be EQUAL (bcos it is double entry bookkeeping - for every DR entry there should be a CR entry) E.g. DR. CR Capital £15,000 Cash £13,450 Wages £750 Rent £800 Profit costs. £600 Debtors (Mrs Jones) £600 ** £15,600. £15,600** ^ so it ends the same in DR and CR because (i thinK) it has spent X amount and that is where it has come from.

Answer 103

For businesses which buy and sell GOODS (not professional services) Shows gross profit by: income from selling goods - cost of buying the goods = gross profit Then transfer this gross profit to profit loss account (means don't need to transfer all the individual sales of goods)

Answer 104

Assets - fixed and current (fixed = used in business to help run eg machinery) (current = short-term eg debts/cash) Liabilities: - current and long-term Current = repayable 12 months or less (e.g. invoice) Long-term = over 12 months (e.g. bank loan) Fixed assets first then current. Current liabilities first then long-term liabilities.

Answer 105

Net current assets = current assets minus current liability shows business's liquidity (ie how easy should be to convert its assets to cash) Net assets = fixed AND current assets minus short AND long-term liabilities (will be same amount owed to owner as capital)

Answer 106

must be done on ACCRUAL basis meaning inc all expenses relating to that accounting period, **even if not received bill yet**

Answer 107

1. Add unpaid bills (company needs to pay) 🧾 - expense (p/l) - current liability (balance) 2. Prepayments (i.e. paid in advance - eg use in next f/y) 💶 - reduce expenses (p/l) - current asset (balance) 3. WIP (i.e. done work but not billed) - income (p/l) - current asset (balance) 4. Closing stock - i.e. unsold stock - current asset (balance) 5. Bad and doubtful debts (doubt will pay) - expense: "provision for doubtful debts" (p/l) - write off (balance sheet) 6. Depreciated in value - % deprecation as expense (p/l) 7. Sold fixed asset for cash - reduce fixed assets and inc cash figure (balance) - if sold for more than recorded value, profit (p/l) - if sold for less, reduce net profit (p/l)

Answer 108

1. trial balance 2. profit / loss and balance sheet 3. final accounts (done in that order)

Answer 109

- date of balance sheet (e.g. seasonal uplift in sales) - if valued recently or not depreciated? closing stock - could it be damaged so acc worth less? - bank **overdraft** = current liability (makes it look less profitable than is) - any exceptional items? eg major investment this f/y

Answer 110

no does not show that may not have received payment also balance sheet may reveal high amount of debt and no cash in bank or maybe used profit to buy expensive machinery

Answer 111

How easily and quickly asset can be converted into cash (e.g. expensive property no use to business if needs cash next week) Current assets are high liquidity so important that have enough of them. Cash is most liquid current asset Debts (owed to you) liquid. Stock not as liquid because may be difficult to sell.

Answer 112

Partnerships and LLPs **Shows** how net profit divided between partners (in acc with PA 1890 or agreement) Separate to current account. Net profit. £5000 Appropriations. MBM. SB Interest on Cap. £70. £30 Salary. £5k. - Profits £12,00.0 £12,000

Answer 113

1. Profit and loss account - contains appropriation account 2. Current account - add the net profits which entitled to - then deduct drawings from - usually separate current account for each partner, so keep capital contributions sep, then know how much interest each entitled to. 3. Balance sheet - separate capital and current acc balances for each partner

Answer 114

- in accordance partnership agreement - if PA - equal shares - sometimes receive: A) **salary** to reflect work carry out B) **interest** on capital contributions ^ not separate from profit - just ways of receiving certain amount of profits before remainder divided

Answer 115

Yes for each partner Showing - contributed capital - profit owed - drawings (from account) To easily identify interest owed on capital

Answer 116

Shows balances of each partner's capital and **current account** seperately in "capital employed" section Doesn't include full **details** of salaries/interest

Answer 117

2 appropriation accounts prepared: 1. shows allocation of profit earned before membership change (eg. split equally between 3 partners from April - Aug) 2. shows how allocated profit after change (e.g. split equally between 4 partners from Sep - Nov)

Answer 118

No - all show the same information in their final accounts

Answer 119

Share **capital** account - records all shareholders contributions rather than one for each ( contrast to partnerships/LLPs where capital kept in capital account for each contributor) if premium, the premium shown separately in **share premium** account

Answer 120

Par value - pay £1 for ordinary £1 share (nominal value) Or pay premium to reflect that company is profitable and worth more than £1 nominal value

Answer 121

Separate section showing contributions usually headed **'capital and reserves'** Ordinary and preference shares shown seperately Any **premium** paid shown separatley under "share premium account" e.g. **EXTRACT BALANCE SHEET FOR Y LTD ** Net assets **Capital and reserves** - preference shares - ordinary shares - share premium account

Answer 122

Premium shown separately in share premium account (NB the amount in share premium account shown on balance sheet)

Answer 123

Issued share capital reduced (bcos as if those shares are cancelled)

Answer 124

No - will not be reflected on accounts

Answer 125

Directors salary = company expense Partnership/ST = not an expense ^ just a way of distributing the profits cos SLP.

Answer 126

- to pay **tax**; - pay dividends; and/or - retained within company (unlike partnership/sole trader - where no dividends but distribute partners/sole trader)

Answer 127

No - because don't pay corporation tax

Answer 128

- most companies: 9 months AFTER end of accounting period (9 letters in companies) - means not yet paid tax when doing accounts - so they have to do **profit/loss** so shows profit **BEFORE** and **AFTER** tax P/L account of X Company Ltd Net Profit before tax £45k Tax £5 Post Tax Profit: £40k

Answer 129

**Current liability** (under 'provision for tax') Once paid - provision for tax disappears; and - cash decreases in current assets

Answer 130

dividends themselves will not be included as an ITEM on the profit and loss account but must be paid out of profits so once paid, cash figure will be reduced (really confused on this) (i actually get this - so deduct profits/cash figure, but don't reduce as a specific loss. it just disppears ! with no real explanation ! just gone !)

Answer 131

aka profit and loss **reserve** - not part of capital - payable to shareholders if deciders decide to recommend dividends

Answer 132

i think: gives some form of enhanced right, could be: - guaranteed right to dividends, if they are available can be cumulative or non cumulative - cumulative means if miss a year, get them the next year - even if means ordinary shareholders get nothing - non-cumulative - miss a year cos not distributable then tough

Answer 133

grant authority to allot (nb special eg for disapplying pre-emption rights)

Answer 134

Yes - e.g. if offering ordinary shares and preference, would need to offer to shareholders (pre-emption) in relation to the ordinary

Answer 135

Model articles don't reference preference shares so would need to alter articles for preference shares via special resolution

Answer 136

(company split into reserves and cap split into cap and current acc for each p) CAPITAL AND RESERVES = companies split into: - share capital (of shareholders) - **reserves** (sep card) CAPITAL EMPLOYED = partnership/sole trader split into **- capital account - current account ** ^ for each partner

Answer 137

Amount company 'owes' to its shareholders i.e. if company wound up, after payment of debts, the amounts which would be left for shareholders would receive

Answer 138

1. REVENUE RESERVES - permitted to distribute to shareholders (inc profit and loss reserve) 2. CAPITAL RESERVES - cannot distribute to shareholders via dividends

Answer 139

Not available to distribute to shareholders - make up long-term capital of company E.g. share premium account - even if charged at premium, the extra amount is capital, not profit. ^ money paid for shares i.e. capital

Answer 140

Reserves which **can be paid to shareholders** (eg via dividends - even if don't) Profit and loss reserve - any remaining profits from the year, after pay tax and any dividends Often label in accounts to show why retained e.g. "debenture redemption reserve" - intend to use to pay off debenture in future

Answer 141

(parents like to consolidate) Parent companies prepare Shows financial positions of ALL companies in group - and therefore company as whole

Answer 142

Yes - in addition to parent company preparing consolidated accounts

Answer 143

Adequate accounting records Directors approve if TRUE and FAIR view

Answer 144

Statute UK and international accounting standards (UK GAAP) (IASB) To ensure prepared in uniform way

Answer 145

Final Members General meeting

Answer 146

Shareholder with 10% or more nominal issued share capital requires it

Answer 147

1. Companies Act Individual Accounts or 2. International Accounting Standards Individual Accounts

Answer 148

Profit and loss account Balance sheet

Answer 149

- separate money made from trading from other items - group expenses together (e.g. 'Administration Expenses') - show corporation tax liability at end

Answer 150

(so this is how will see it on Comp House usually) - 'assets' (rather than employment of capital as for sole/partn) - liabilities: a) amounts falling due in one year; and b) more than one year (rather than current and long-term liabilities) - leave provision for tax - total assets less current liabilities (so before long-term liabilities)

Answer 151

statement of financial position

Answer 152

IFRS just sets out minimum info that needs providing Profit loss account: ( vsimilar to UK) but turnover labelled **'revenue'** Balance sheet) (v similar) but: **different terminology** eg. non-current assets and non-current liabilities instead of fixed assets and l-t liabilities

Answer 153

No - keep nominal value the same and add a premium. Receive both amounts. Say if had

Answer 154

Yes defo (remember balance sheet includes capital employed or in some formats, just assets)

Answer 155

NET ASSET VALUE will go up by the sale price of the share being sold multiplied by the total number of shares being sold.

Answer 156

The net asset value will go down by the amount of interest and fees being charged on the loan (if any). (when borrows, receives cash so current assets increase - but takes on corresponding liability)

Answer 157

profits only (not assets) profits are calculated across company's lifetime, not just that year, and indicated by profit loss reserve (after losses deducted)

Answer 158

usually land and buildings are company's highest value asset and most stable form of security

Answer 159

- void against TPs - if court extended registration period, only have priority from date of registration - entitled only to money left over - if court to extend, void so unsecured

Answer 160

provide only a fixed return on the investment; so the investor would not share, beyond the fixed entitlement, in the income profits and net asset growth of the company. *difficult* think this means u still only get the same amount as would if allot nominal??????????

Answer 161

1. **stat demand** bill of **£750** not paid or arranged to within **21 days** of service; (nb would often petition for administration not liquidation) 2. **Court** order/decree/**judgment** unpaid; 3. 'Cash flow test' **unable to pay debts** as fall due could prove by: - **current** assets exceed current liabilities - available financial info - failure to pay undisputed invoice as evidence 4. 'Balance sheet test' - **liabilities** exceed assets 5. Convince court it is **just and equitable** to wind up - likely still need to prove unable pay debts. NB: cash flow and balance sheet tests often overlap and also not exact cos company's debtors may pay the company soon so court takes into account all evidence cash flow and balance sheet - financial info required hard to get hold of - public info usually outdated

Answer 162

All creditors: 1. CVA (company voluntary agreement) 2. Administration 3. Liquidation SECURED creditors only - depending on terms of security: 1. Appoint LPA receiver 2. Appoint administrator out of court; or 3. Security created before 15 September 2003, appoint administrative receiver.

Answer 163

(aka winding up) - Stops trading and ceases to exist - Assets sold Once proceedings begin: - Director's **powers cease** and liquidators take over running of company - liquidators review past transactions and may challenge them - then distribute assets in correct order - Company will be dissolved at Companies House within a few months

Answer 164

CL - clair lin CVL - clar vic lin 1. Compulsory liquidation (usually following insolvency proceedings by a TP) 2. Creditors voluntary liquidation (CVL) (commenced by insolvent company, usually due to pressure from creditors) 3. Members voluntary liquidation (commenced by solvent company because wishes to cease trading or is dormant and wants to end affairs in orderly manner)

Answer 165

TP - aka petitioner (usually a creditor) Presents winding up petition at court Est at least one ground for compulsory liquidation (usually unable to pay debts)

Answer 166

Last filed accounts (but often too old) Company may admit in correspondence Usually issue statutory demand and if remains unpaid after 21 days, issue winding up petition Or may obtain a judgment (may not be for insolvency) - as if don't pay, demonstrates inability to pay debts

Answer 167

1. **genuine and substantial dispute** re the money owed - if judgment against company already obtained, difficult to argue unless judgment set aside) - even if set aside, court can can wind up if still think not able to pay debts 2. that able to pay debt within **reasonable period** of time - court may adjourn hearing

Answer 168

Official Receiver becomes company's liquidator (OR is public sector) OR can appoint private insolvency practitioner - depending on case / creditors' wishes - company must have enough to pay insolvency practitioner's fees

Answer 169

Initiated by the **company** Shareholders and directors agree Then creditors take over Even though voluntary, often pressured by creditors And also because of **fears of misfeasance** and **fraudulent** or **wrongful** trading if continue trading then goes into liqudiation

Answer 170

CVL (creditors voluntary liquidation) bcos can only do MVL if solvent (would usually just use MVL if retiring/dormant etc)

Answer 171

1. Solvent 2. Directors swear statutory declaration. that company is solcent All the S's. Solvent. Stat dec.

Answer 172

Both - director's powers terminated / liquidator takes over running Compulsory - director's **appointment** terminated

Answer 173

(liquid eyeliner gives power to) 1. Carry on the company's business 2. Commence and defend litigation on company's behalf 3. Investigate past transactions 4. Investigate director's past behaviour 5. Collect and distribute assets (eg sell to raise money for creditors or distribute to creditors) 6. Doing all necessary to facilitate winding up of company And they must prepare final accounts After that, apply to be released Sounds quite nice?

Answer 174

Liquidator applies to be released Registrar dissolves company 3 months later !! (3 months remember AB saying that)

Answer 175

To maximise assets available to creditors

Answer 176

Bringing claims on company's behalf, with any awarded money payable to creditors. Main claims can bring: 1. Avoidance of certain floating charges 2. Transactions at an undervalue 3. Extortionate credit transactions (Chuck in Pari) 4. Preferences (gloss v stick on GG) 5. Transactions defrauding creditors (Gossip Girl episode) ATE PT main ones = transactions at an undervalue, preferences and void floating charges SEE TABLE ENGAGE TASK!!!!

Answer 177

Floating charge granted without company receiving FRESH consideration in return then **AUTOMATICALLY** void - 2 years ending with onset (connected) - 12 months otherwise (lots of 2s and 2 words floating charge) Connected - don't need to show insolvent at time or as a result. e.g. no fresh consideration if grant security of charge AFTER receive loan

Answer 178

*12 months / 2 years - floating charge is 2 words* 1. UNCONNECTED: - relevant time = 12 months before onset insolvency - insolv at time or as a result 2. CONNECTED: - relevant time = 2 years ending with the onset of insolvency; - dm if insolvent at time or as a result Onset insolvency means: - compulsory: date winding up petition presented - voluntary: date company formally enters liquidation - administration: company files notice intention to appoint administrator e.g. director's husband - doesn't matter whether insolvent before / when gave

Answer 179

1. director or shadow director 2. close relative or business associate of of director or shadow director 3. Associate of the company - ie company in same group OR company controlled by same director (nothing to do with shareholders) (not usually banks etc)

Answer 180

- **write** to charge holder saying believe invalid 👨‍💻 - if charge holder tries to enforce the charge, seek **injunction** on basis charge is invalid ✋🤣

Answer 181

Gave ''preference' to someone else at relevant time (before onset) Put in better position if company became insolvent than would have been otherwise Eg - creditor paid before others - unsecured creditors given security

Answer 182

Connected = 2 years Unconnected = 6m BOTH (no presumption) insolvent at time or as result ^ liq/admin must prove e.g. court proceedings, balance sheet, correspondence Must DESIRE, not just intend, prefer.

Answer 183

- compulsory: date winding up petition **presented** - voluntary: date **formally** enters liquidation - administration: company files **notice** intention to appoint administrator - or actually enters, if earlier

Answer 184

must be desire not intent intent offering only to get a loan which need to **survive** is it necessary? was there **pressure** on them? eg desire if personal guarantee INFERRED if connected but can rebut.

Answer 185

NO must show via financial info like balance sheet and correspendence Unlike floating charges and undervalue. i would PREFER if PREFERENCES were the same ! *but there is a presumed desire to prefer*

Answer 186

usually **RESTORE** company's position court may order: - release security given BY company - return property transferred; or - pay sale proceeds of property forming part of the transaction to the company (eg if they sold the property which the company gave them, the company gets those sale proceeds)

Answer 187

U2 made apple gift or at least signif lower than value of hte album. I can only presume were insolvent so nothing not lose. Although they may rebut that. 1. made **gift**; or 🎁 2. consideration **SIGNIFICANTLY** lower than value ⬇️ **2 years** before onset of insolvency. Must have been **insolvent** at time or become insolvent as a result. Insolvency **presumed** connected but rebuttable.

Answer 188

1. Entered in good faith 2. With view to carrying on the company; and 3. Reasonable grounds believing it would benefit the company (eg could not find buyer who would purchase at full price) u2 i wouldnt buy at full price

Answer 189

made in **3 years** ending on day went into administration or liquidation must be **grossly ridiculous** payments or grossly contradicts ordinary principles on **fair dealing** V DIFFICULT TO PROVE cos gross bit

Answer 190

Transactions at an **undervalue** WHICH are made to either: 1. put assets **beyond reach** of someone who would make claim against it 2. **prejudice** interests of such person in relation to claim they might make NB applies the same for bankruptcy and corporate insolvency

Answer 191

**Creditors** or liquidators/administrators

Answer 192

Only at discretion of court

Answer 193

- return property which transaction was about - discharge security given by company as part of transaction

Answer 194

Time limit expired - bcos no time limit for defrauding creditors But hard to prove the longer time has passed

Answer 195

1. Fixed charge holder 2. surplus of what fixed charge holder entitled to, paid to **liquidator** if shortfall, fixed charge holder joins pool of **unsecured** creditors for remaining debt

Answer 196

Liquidator sends forms to all potential creditors and asks them to detail the debts owed Assess the claims and may approve/reject claims Small claims for under £1,000 are pretty much admitted automatically

Answer 197

1. pay fixed charge holders (will do this whilst selling assets) 2. pay winding up expenses - inc liquidator's own fees 3. preferential debts - rank and abate equally 4. Floating charge holders - in order of priority 5. Unsecured creditors - rank and abate equally (See seperate queue card for rank and abate equally)

Answer 198

Employee's wages Up to **4 months** before winding up order Maximum of **£800** per employee (sad) (double 4 is 8) Employee's accrued **holiday** is also preferential debt.

Answer 199

HMRC for payment of taxes which that company COLLECTS on NOT all the taxes that company owes E.g. **VAT and PAYE** - is preferential But not for corporation tax

Answer 200

Statutory procedure during liquidation Requires portion of money available for FLOATING charge holders (secured) to be set aside for UNSECURED creditors floating ring 🛟 omg that literally is a flaoting ring

Answer 201

- **50%** of first **£10,000** received from property subject to floating charges; and (so 5k) (half is a lot) - **20%** of all other remaining money (25k run all together if add 50/20.) (10k max run for me lol) (is that remotely helfouL) Up to limit of **£800k** (or 600k if charge created before 6 April 2020)

Answer 202

1. Administration 2. **Company** voluntary agreements 3. Schemes of arrangement - not strictly insolvency as can enter even if solvent - expensive and long - for larger companies usually 4. **Restructuring** plans 5. Free-standing **moratorium** 6. Informal agreements with creditors (we mainly do administration and CVA)

Answer 203

risk that creditors may still issue petition instead of going ahead w agreement so not good practice esp if acting for debtor NB: not apply to IVAs and CVAs etc / other ones where states on queue cards that binding

Answer 204

Administrator **appointed** to **run** company and make necessary changes to **improve financial** performance **Or** get in position where can be sold as **going concern**

Answer 205

Get a statutory moratorium (Nb not same as moratorium procedure) baso breathing space from creditors taking action can't: - bring winding-up petition - enforce a judgment - continue or commence legal claim against company w/o administrator's consent

Answer 206

Act in interests all creditors 1. Primary objective - rescue company as a **going concern** (ie financially stable / continue business into future) 2. If not poss, achieve **better result for creditors** than if company were wound up 3. if that's not poss either, must realise (sell) property to pay **ONE OR MORE** secured or preferential creditors

Answer 207

1. Court route - court order following filing application and a hearing at court 2. Out-of-court route - company, its directors, qualifying charge holder or or even **unsecured** creditors **filing** certain docs at court

Answer 208

- must be satisfied that one of the purposes of administrator reasonably likely to be achieved (ie going concern, put creditors in better position or sell property) (similar to insolvency - CL - must prove ground insolvency)

Answer 209

Inform anyone who would be entitled to appoint administrator e.g. certain QFloatingCH As soon as reasonably practicable sry u though toculd beat to it !! 🤪

Answer 210

Serve **notice of intention** of administration on: 1. **Court**; and 2. Any **QFloating CH**; and 3. Any **lender** who is entitled to appoint administrative procedure AND Director file **statutory declaration** at court that company is **unable** to pay **debts** and **NOT in liquidation** Means CANNOT use if winding up petition already been presented (checked all of this)

Answer 211

Soon as notice of intention for administration **filed with all applicable parties** (i.e. court/QFloatingCH/lender who is entitled)

Answer 212

Qualifying if charge document: - empowers holder to appoint administrator without petititioning court; AND - charge doc relates to the whole or substantially WHOLE of the company's property / or does when added to other security of same lender AND - floating charge is enforceable by holder (eg if late payment)

Answer 213

Can use out-of-court route to appoint administrator (but not a receiver) If there is another with the right WHO HAS **PRIORITY**, must notify to give opportunity to appoint

Answer 214

Administrators - all creditors Receivers (eg LPA receiver) - only to the party who appointed them Administrative receivers - primary to party who appointed, secondary duties to others

Answer 215

*kind of similar to Ds out of court admin* **File notice** of appointment at court. Notice must include **statutory declaration** that: - is a QFCH; - **Enforceable**; and - Complies Insolvency Act Begins once that doc filed.

Answer 216

CREDITORS ^ can request more info and amendments to proposals Proposals must be approved by - **majority in value** of creditors, present and voting But those who vote against must not be over 50% in value of **UNCONNECTED** creditors eg - read this: - 51% of shareholders voted in favour - but of the 49% who voted against, 51% are unconnected

Answer 217

Power ceases But remains in office Administrator **controls** company's assets but does not **own** them admin carries out creditor-approved proposals

Answer 218

1. Appoint and remove **directors**; 🫵 👋 2. **Pay** creditors, but if they are unsecured only with court's permissions; 💰 3. Calling meeting with creditors or shareholders; 4. Dealing with **property** subject to fixed charge; 🤝 5. Dealing with property subject to floating charge; 🤝 6. Investigating transactions and applying to set aside or challenge 7. Commencing **wrongful** trading or **fraudulent** trading proceedings against directors And anything necessary for management of affairs

Answer 219

- ends **automatically after one year** so as well as exec year. we have admin year ! - can apply to extend - can apply to reduce (eg objective achieved or creditor doesn't think can achieve) - creditor can apply to court and may then present **winding-up petition** if wish

Answer 220

Administrator sells assets and business straight away Sale already agreed, and often sell to management of insolvent company perfectly legal ! :) saves jobs. :( **Unsecured** creditors not consulted and often don't get much.

Answer 221

Company voluntary agreement binding creditors + company usually liq/admin can enter usually agree to **wait** before receive what owed or accept **part payment** of debt

Answer 222

Company's business is fundamentally fine but **short-term** cash flow issues Aims to prevent liquidation :) cheap and simple :) creditors likely paid more under CVA than liquidation/administration

Answer 223

Proposals approved by: - 75%+ in value creditors; AND - 50%+ non-connected creditors chair (usually IP) decides if connected. secured can only vote on any part of debt owed to them which is **unsecured** CVA does not impact rights of secured AND preferential unless agree to it doing (makes sense since p sure secured can just sell the asset themselves independently)

Answer 224

Yes On all unsecured creditors But not for future debts But doesn't impact secured and preferential creditors unless they agree to it

Answer 225

Moratorium created by CIGA 2020 - gives space to enter into CVA

Answer 226

- decide if connected - supervise arrangement - monitor implementation

Answer 227

Court-supervised 'Compromise' or 'agreement' between company and all of its creditors (**unsecured and secured**) and **shareholders**

Answer 228

insolvency NOT required likely encounter financial difficulty Directors: - prep restructuring plan 📈 and - apply court for permission to call meeting between shareholders and creditors (in theory creditors/SHs can do this too)

Answer 229

2 court hearings ✌️ 1. creditors able to make representations at first one 2. second one court decide whether to sanction the proposed plan In between the hearings: - creditor and SH **meetings** held - split into **classes** - each class approved if **75%** by value of that class Unlike schemes of arrangement - requires overall majority.

Answer 230

cross-class cram down provision Court can **'cram down'** a **dissenting** class of creditors so can't block otherwise **viable** plans via sanctioning a plan Court only sanction if satisfied dissenters would be **no worse off** by court sanctioning

Answer 231

(diff to the other moratorium re no claims against company etc) Company protected from PRE-moratorium debts But must pay debts incurred DURING moratorium in full Company directors remain in control but insolvency practitioner oversees it / can terminate

Answer 232

- **unable to pay** **debts** or **likely** to become unable to pay debts - not entered a moratorium in past **12 months** - not a bank - **English** companies only - no **outstanding petitions** against them

Answer 233

Company can't declare on its own - need **insolvency practitioner** (a monitor) involved Directors remain in control - the 'monitor' oversees - Directors **file** docs at court - Proposed **monitor** confirm likely result rescue as **going concern** M for moratorium. M for monitor.

Answer 234

**20 business days** Commencing business day AFTER obtained (will be obtained on date docs filed or court order) Directors can **extend**: - further 20 bus days by filing other docs - up to one year if creditors impacted by it agree monitor can terminate in certain circumstances

Answer 235

No doesn't apply to employees **wages** or salaries Or **monitor's renumeration** or expenses Or goods / services supplied **during** moratorium

Answer 236

Secured creditors If charging doc allows (eg if miss payment) Receiver can deal with (usually sell) 1. LPA receiver - fixed only (think of it as property is a fixed asset) 2. Administrative receiver - floating only - generally only charges on or after sept 2003 (administrators after this)

Answer 237

fixed charge holders only in charge doc can sell the secured property to repay If not fully repaid, unsecured for remainder If get more, surplus for unsecured creditors don't need to be insolvency pract

Answer 238

Floating charge holders who have charge over ALL company's assets Only for floating charges created before 15 Sept 2003 (after that - follow administration route) Enforceable in accordance with the loan agreement eg failure to make payment

Answer 239

**Runs** company **and** sells the charged assets Proceeds used to pay **own** costs and pay relevant floating charge holder In theory, will then resign. (but liq often follows)

Answer 240

**Petition** advertised 1. CL - once **submitted** (even if not granted) 2. CVL/MVL = once SR to liquidate passed Then again 1. CL: **Order** advertised by OR once appointed 2. CVL - liquidator advertise once shareholder *resolution to wind up passed* 2. MVL - *appointment* advertised once liquidator nominated

Answer 241

special for both to liquidate

Answer 242

sell or dispose of any assets

Answer 243

*NB creditors voluntary is technicaly voluntary on part off Ds but directors usually pressured into entering* Compulsory - If majority of creditors agree Voluntary - Majority creditors agree and resolution passed (resolution of creditors not shareholders i think)

Answer 244

See notes if want full break down of diff procedures Within 7 days resolution passed: - make **statement** as to **affairs** of company - send it to **creditors** - seek nomination for creditors on appointment of **liquidator** Creditors must hold virtual meeting to consent on liquidator

Answer 245

- not enough money to pay a debt which is due now - debt payable in future but no reasonable prospect they will be able to pay

Answer 246

1. stat demand. **5k** or more. if not within **21** days either paid; or applied court set aside 2. stat demand re **future** liability debt **5k** or more. in 21 days, do they: - show **reasonable prospect** of being able to pay when due; or - apply **court** to set aside 3. obtain court judgment for debt of 5k or more and attempting to enforce without success any of these satisfied, PRESUMED insolvent. IF NOT OWED 5K CAN JOIN TOGETHER WITH OTHER CREDITORS

Answer 247

1. **talk** to creditors to reach agreement 2. if doesn't work, can apply for **own bankruptcy ** 3. enter Individual Voluntary Arrangement (**IVA**) or debt relief order 4. **Debt Respite Scheme**

Answer 248

Individuals only Debtor's assets pass to trustee in bankruptcy Who uses to pay as many of their debts as poss Debtor restricted on spendings

Answer 249

Usually one year Then bankrupt free from almost all their debts, even if not paid all debts in full

Answer 250

must repay even after bankrupt discharged makes sense sory l housemat

Answer 251

1. creditor presenting petition at court 2. online application by debtor

Answer 252

at court if owed 5k or more or if owed less, other creditors may join together must be owed a liquidated (fixed) sum - not a sum that court would need to assess must show debtor unable to pay or little prospect (can show by other queue card re stat demand etc)

Answer 253

- petition to debtor's local **county** court - pay **deposit** for court **fee** and **trustee** - arrange for **personal service** of petition i.e. agent who hands to debtor and wit statement that done so - if debtor avoids agent, can seek court order for substituted form of service (eg posting it)

Answer 254

apply **online** pay application **fee** and **deposit** for official receiver adjudicator must make or refuse within **28** days - unless required further info, then 42 days

Answer 255

Official Receiver CREDITORS can appoint a private one if debtor has enough assets

Answer 256

take steps to protect debtor's property dispose or sell any perishables / property depreciating in value where required, realise assets and use proceeds to pay creditors investigate affairs and set aside/challenge transactions (part of realisation process)

Answer 257

Automatically when bankruptcy order is made Note: their WHOLE estate will vest

Answer 258

*spend salary on IPA.* if receive salary beyond necessary to SUSTAIN self and fam trustee can require to enter income payments agreement (IPA) where some of salary pays off debts If disagree on sum to pay, can apply to court to decide via IPO (income payments order)

Answer 259

if ones got are too expensive, trustee in bankruptcy can sell and re-buy cheaper alternative e.g. sell my macbook and get an acer x

Answer 260

yes their interest in home passes to trustee can't evict straight away - need court order to sell will consider all circumstances eg children / spouse / conduct / creditors after 1 year, interests of creditors overtake interests of others, unless exceptional circumstances - so trustee likely to get an order for sale

Answer 261

**3 yrs** ownership reverts back to bankrupt, unless trustee has: 1. **sold** property 2. already applies **order** for sale, or possession or charging order 3. entered **agreement** with bankrupt re the home (eg keep interest in exch for payment)

Answer 262

To creditors Main powers: 1. apply set aside transactions at undervalue 2. apply set aside transactions defrauding creditors 3. apply to set aside preferences 4. disclaim onerous property 5. avoid extortionate credit transactions all same as insolvency except **disclaim onerous property instead of floating charges** w/o fresh cnsideration

Answer 263

ends all bankrupts rights and liabilities in relation to it if anyone suffer loss as a result (eg money would have earned on the contract), may be unsecured creditor in bankruptcy - can make formal claim

Answer 264

Can investigate 5 yrs (UV = gift or sub less consid) If 2 years or less, don’t need to show insolvent as a result or at time If over 2 years ago, then do - unless they are an ASSOCIATE  Associate - even if over 2 yrs ago - rebuttable presumption insolv i.e. close relative or business associate

Answer 265

**same as insolv except intended** 2 yrs or 6m if associate creditor, surety or guarantor better position than otherwise INTENDED to (not desired) Presumed intent if connected Insolvent at time or as a result (regardless connected) eg repay loan to bestie before bank

Answer 266

Can only challenge preferences made - 6 months before; or - 2 yrs before if in favour of associate (ie before bankruptcy petition presented) And must have been insolvent at time or became insolvent as a result

Answer 267

**same as insolvency!** chuck is individual too x any credit obtained 3 yrs before bankruptcy order terms must be extortionate v rare and no reported case law

Answer 268

same as insolvency remaining: - give to trustee in bankruptcy owed: - join unsecured creditors re the remainder eg premises valued at £675,000 bank loan secured for 750k only secured for £675k and remainder £75k is unsecured

Answer 269

1. Costs of bankruptcy (inc trustee's fees) 2. Preferential debts 3. Unsecured creditors 4. Postponed creditors i.e. debtor's spouse Within each category, rank and abate equally if not enough

Answer 270

suspended cos uncooperative or dishonest but usually deal w that behaviour by BRO or BRU

Answer 271

1. Wages/salaries of employees for work carried out in 4 months before bankruptcy petition Up to max of £800, PLUS holiday pay owed 2. HMRC - **secondary** preferential (eg PAYE/VAT but not income tax) ^ same as corp insolvency

Answer 272

1. Business restrictions 2. Personal restrictions 3. (sometimes) BROs and undertakings

Answer 273

Can't: 1. take loan of MORE than £500 **without disclosing** bankruptcy 2. be a **director** 3. form, manage or promote a **company** 4. trade under **diff name** than the one bankruptcy order made against, **unless disclose** to anyone trade with that bankrupt 5. continue in **partnership**, unless partnership agreement varies the PA

Answer 274

- can't get credit of MORE THAN £500 without disclosing bankruptcy to lender - so can't have credit card or normal current account with overdraft - can't practice as solicitor without leave of SRA

Answer 275

Seen to be culpable due to recklessness, dishonesty or negligence BRO or BRU

Answer 276

2 - 15 years same length of time as director disqualification

Answer 277

(2-15/culpable cos reckless etc) **BRO** - bankruptcy restriction order: **court** BRU - bankruptcy restriction undertaking - agreement **w/o need for court** - bankrupt agrees to it Baso the same. Means can't: - credit over £500 w/o disclosing - be a director, insolvency practitioner or MP

Answer 278

1. IVAs 2. Negotation with creditors 3. Debt relief orders Should also consider debt respite scheme

Answer 279

Like a CVA but for individuals Binding agreement between unsecured creditors Agree how much each will receive from bankrupt Bankrupt or their trustee can seek

Answer 280

Insolvency practitioner - act as 'nominee' Formulate proposals Implement proposals - then become 'supervisor' Will only act if sufficient assets for the agreement

Answer 281

- debtor **apply to court** for **moratorium** - **nominee** prepares **report** for court re whether debtor put forward reasonable **proposals** - approved if: A) **75**% or more creditors in value; and B) at least **50**% of those in value aren't associates (nominee decides if associates) Literally same as CVA

Answer 282

All unsecured creditors can vote and bound Not binding on preferential or secured unless agree Binds all unsecured regardless of if attended

Answer 283

debtor doesn't comply or discover provided false or misleading info eg entered transaction at undervalue insolvency practitioner (ie 'supervisor') would then petition for bankruptcy as cannot apply set aside transactions like trustee in bankruptcy can

Answer 284

Debtor: - avoids bad publicity / stigma / restrictions of bruptcy Creditor: - maybe higher likelihood of getting money than bankruptcy - **cheaper** and more straightforward BUT creditor consider if debtor can be trusted to comply

Answer 285

Voluntary Credit card controllers should comply with Protocol in relation to consumer credit card debts **Is an IVA on standard terms, inc fees for insolvency practitioners and levels of returns for creditors**

Answer 286

(respite sounds nce and what is) **breathing** space via legal protection from creditors pauses enforcement action, contact from creditors, freezes interest on debts 1. standard breathing space - **60** days 2. mental health crisis breathing space - receiving MH treatment - as long as MH issues last **PLUS 30 days**

Answer 287

- apply to FCA-approved **debt adviser** - must be satisfied can't pay debts when due - not: 1.**undischarged** bankrupt 2. in **IVA** 3. subject to **debt relief order** 4. not had breathing space order in last **year**

Answer 288

all creditors in that category share available money between them don't get equal amounts but receive same percentage of outstanding debt owed (assets) divided by (liabilities) = ____ (however many £ owed) x ____ = amount owed e.g. Company insolvent. Has £150k assets and 325k liabilities. 5 unsecured creditors. £150k divided by £325k = 0.46 ^ for each pound owed they get that £30,000 x 0.46 = £13,800 (lower number divided by higher if there is not enough £ for them)

Answer 289

1. duty to act in best interests of company for benefit of members switches to creditors - if on border of insolvency, not definitive, depends severity difficulties links to wrongful trading - if knew going into liquidation, must take every step to **minimise loss to creditors** 2. exercise reasonable care skill and diligence

Answer 290

no cos SLP unless: - provided personal guarantee - wrongful trading and ordered personal contribution (ie if insolvent, trade in way to make things worse)

Answer 291

excessive pay directors continued trade when ought known probs shouldn't

Answer 292

figure recorded in accounts if sold for more, record as profit if sold for less, record as **reduction net profit**

Answer 293

No shareholders will be the last group to be repaid. They aren't classified as secured, preferential or unsecured creditors. Shareholders will only receive proceeds if any amount remains after all other creditors have been paid.

Answer 294

unsecured loan HMRC for corporation tax trade creditors *imp* - employees remaining unpaid wages (after they have received their £800)

Answer 295

liquidator - they can assign the right to a creditor

Answer 296

individual bankrupts via **approved debt adviser** NOT available if: - unsecured liabilities over 30k - gross assets over 2k 🤢🤮 (that's why i put 2 lol) - car worth 2k or more (unless adapted cos disabled) 🚗🚗 (that's why i put 2 cards lol) - disposable income over £75 per month 💰 - had DRO in last 6 years ❻ - subject to other formal insolvency procedure 👔 - owns own home 🏡

Answer 297

relief from enforcement action for one year but same restrictions during the year as any other bankrupt - may extend 15 yrs if culpable/dishonest if situ improves, must repay creditors

BL 2 Flashcards

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