Company Conclusion – notes for law and accounting students

“Companies unlike humans don’t always die”

 

Receivership

= receiver – a person legally appointed to enable a creditor obtain payment for a debt owed to that creditor. Mainly appointed by chargeholder, but there are what’s known as equitable receivers, whose role etc. is not dissimilar, and who are court appointed   ( appointed by the court in its equitable role and not confined to just company law issues)

~ Appointed by Debenture holder.  Role = go in, realise the mortgaged asset and pay off the debenture holder; then get out.  Normally, banks appoint receiver where they don’t want to wait for liquidation.  Banks owed money has two routes → (1) Liquidator; → (2) Receiver.  If asset in jeopardy or feel its better for them, they appoint receiver or can apply to Court.

~ Disqualified from being Receiver  = a company, bankrupt, minor, unsound mind, former director or person connected with company.  Looking for independence.

~ Powers of Receiver = ?

~ Effect of Receiver = ?

~ Duties of Receiver =

•  Duty to notify everyone of his appointment;
•  Duty to exercise reasonable care and skill in selling the charged assets;
• Duty to report to the chargeholder, Company, CRO (+ ODCE if crime suspected);
• Duty to pay debts in proper order as per “priority of debts” which means the debenture holder who appointed Receiver could get nothing (especially if they have floating charge);
• Duty to company (and its members);
• duty to get best price for the charged asset, and if surplus repay surplus to company.

~ Removal from office = • Court; • Debenture Holder; • Resignation;

 

Liquidation (or “winding up”)

Liquidation = brings company to an end.  Company ceases and powers of directors go to Liquidator who resolves company’s affairs, pay off debts and if surplus divide between ordinary shareholders.

Liquidator = one appointed to wind up company.

Really 2 types of liquidation.

*****Compulsory Liquidation → Court involvement

Court must be satisfied that one of the following met = list them ?

2 most common of above are: –

• “unable to pay its debts” e.g. (a) fails to pay creditor within 3 weeks of demand for payment; (b) fails to pay off Court Decree for money owed; (c) Court otherwise satisfied company unable to pay debts.
• “just and equitable” to do so e.g. (a) management deadlock; (b) fraudulent purposes; (c) oppression of minority members; (d) comp cannot achieve its objectives

Procedure: – Petition issued by High Court; advertised; then case heard and decision made for liquidation or not.

 

****Voluntary Liquidation → Members vol liquidation  -v- Creditors vol liquidation

Generally no Court involved.  Company initiates its own liquidation by holding members meeting and/or creditors meeting.

Members Liquidation = Company solvent i.e. assets exceeds liabilities → surplus there for ordinary shareholder.

• Members special resolution passed 28 days before it. Directors do Declaration of Solvency;
• At members meeting liquidator appointed.

 

Creditors Liquidation = Company insolvent i.e. assets less than liabilities.

• Members meeting and pass ordinary resolution that company be wound up by reason of its liabilities;
• Advertise Creditors meeting in 2 daily newspapers;
• At meeting statement of affairs and list of all creditors with amount owed laid before the creditors and the name of the company’s preferred liquidator;
• Creditors must approve liquidator ( they can vote on their own one) and can appoint Committee of Inspection.

———– See summary table.

  The Liquidator

• An authorised insolvency practitioner. Role = dissolve the company i.e. realise company assets, pay creditors and if surplus divide between ordinary shareholders.
• Powers: – • sell any assets; • execute deals; • reach deals; • carry on business; • appoint agents; •all things necessary to wind up company.

Really = powers of Board of Directors

Payment of Debts: – “priority of debts” (What happens uncalled capital?)

1. Costs of Liquidation;
2. Debentures with fixed charges provided it was regd within 21days of its creation (paid in order of creation if secured on same property);
3. Preferential Creditors i.e. taxes, employees pay;local rates.
4. Debentures with floating charges provided it was regd within 21days of its creation (paid in order of creation);
5. Unsecured Creditors e.g. suppliers, ESB;
6. Members dividend if declared;
7. Preference Shareholders;
8. Rest of money, if any, divide between ordinary Shareholders.

[now give example where there is a surplus v deficit]

Termination of Appointment: –

• Removal by Court;
• Completed his/her job;
• Becomes Disqualified;
• Resign

 

Examinership

Company has financial difficulties i.e. liabilities exceed assets; apply to Court for its protection; appoint examiner to put a scheme of arrangement together to see if company has reasonable prospect of survival.

 

Company strike-offs 

Generally done when returns not made to CRO. Can also be used where company never traded.

Administration of an Insurance Company

An example of this is Quinn Insurance