Where directors make a false statement of solvency prior to a members’ voluntary liquidation, which of the following have they committed under the relevant legislation?
A A breach of criminal law with criminal penalties
B A breach of civil law with criminal penalties
C A breach of civil law with civil liability
D A breach of both civil and criminal law with liabilities under both
Which of the following requires court approval before the appointment of an administrator?
A Creditors
B Holders of floating charges
C The directors of the company
D The company itself
Which of the following is NOT an automatic consequence of a compulsory winding up order against a public limited company?
A Transfers of shareholdings are suspended
B Liquidation is deemed to start on the date of the issuing of the order
C Directors cease to exercise any management power
D Employees are immediately dismissed
In relation to company law:
(a) explain the meaning of, and procedures involved in, voluntary liquidation; and
In relation to company law:
| (b) | explain and distinguish between: (i) a members’ voluntary liquidation; (ii) a creditors’ voluntary liquidation. |
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In relation to company law explain:
(a) the grounds on which an action for compulsory winding up may be taken under the Insolvency Act 1986;
(b) the procedure to be followed in, and the consequences of, an action for compulsory winding up.
In 2008 Ger was disqualified from acting as a company director for a period of 10 years under the Company Directors Disqualification Act 1986 for engaging in fraudulent trading.
However, he decided to continue to pursue his fraudulent business and, in order to avoid the consequences of the disqualification order, he arranged for his sons, Ham and Ive, to register a new company, Just Ltd, with them as the only shareholders and directors of the company. As neither Ham nor Ive have any business experience Ger arranged for his accountant Kim to run the business on his instructions. Although Kim took no shares in the company, and was never officially appointed as a director, he nonetheless assumed the title of managing director.
Lyn, a customer of Just Ltd, suffered considerable loss on account of its fraudulent activity.
Required:
Advise Lyn as to:
(a) the status of Ham, Ive, Ger and Kim as directors in Just Ltd; and
(b) the potential liability of Ham, Ive, Ger and Kim under company legislation.
On the advice of his accountant, Mat registered a private limited company to conduct his small manufacturing business in January 2010. One of the reasons for establishing the company was to avoid liability for potential losses. The initial shareholders of the company were Mat, his wife Mary, and her father Norm, who each took 1,000 shares in the company, each with a nominal value of £1. The accountant explained that they did not have to pay the full nominal value of the shares at once, so they each paid only 25 pence per share taken, with the result that they still owed the company a further 75 pence per share to be paid at a later date.
When the company was established it became apparent that it needed to borrow money from a bank to finance an expansion in production. To that end Oop bank plc lent the company £20,000 secured by a fixed charge against the land Mat had previously transferred to the company, with an additional personal guarantee from Mat for any further debts owed by the company to the bank.
Unfortunately the business has not proved successful and Mat and the other shareholders have decided that it is better to liquidate the company rather than run up any more debts. The current situation is that the company’s land is worth £20,000 and it has further assets to the value of £7,750, but it has debts to business creditors of £10,000 and owes the bank a further £10,000 on its bank overdraft.
Required:
Explain the rights of the various creditors and the potential liability of Mat, Mary and Norm. (The actual costs of winding up may be ignored.)