Lecture notes
INSOLVENCY PROCEDURES
- Institution
- Liverpool John Moores University (LJMU)
Lecture notes of 5 pages for the course business law and practice LPC at LJMU (Insolvency notes)
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BLP LGS 9 PART 1INSOLVENCY PROCEDURES
• VOLUNTARY ARRANGEMENTS
• ADMINISTRATION
• LPA RECEIVERSHIPS
• LIQUIDATION / WINDING UP
PAGE 99-122
TERMINOLOGY NOTES –
• Liquidation
• Winding up
• Creditor – secured and unsecured
• Insolvent
• Insolvency practitioner
• Administrator – administration in insolvency – aim is to maximise the assets and recoup
money for distribution of the creditors – maximise the creditors position
• Nominee – a person or a firm whose name is titled on securities or on other properties
• Floating charge
• Receiver – a form of creditor
VOLUNTARY ARRANGEMENTS –
• Available for both solvent and insolvent companies
• Creditors likely to be paid some monies owed as procedure less complex than administration
or liquidation
• Procedure can be initiated by
o Directors
o Administrator
o Liquidator
Procedure –
1. Directors make proposals and a nominee (independent solvency practitioner report on
whether meeting should be called) very much need to get the creditors on side if bound by it
2. Nominee reports on whether meeting called
3. If favourable – nominees summons meetings
4. Approval of VA by members meetings and of creditors meetings
5. Nominee becomes the supervisor of the VA
• Effect of the VA – all creditors bound
• Written agreement
Moratorium – almost like a state of execution – business can have up to 28 days (small to medium
businesses) can be extended by approval of the court – may be enough for a company to get itself
out of trouble
Shortcomings of VA –
• Secured creditors and preferential creditors are only bound if they have expressively
consented to the proposal
• i.e. no moratorium
• better to implement VA within the context of an administration order
, • note moratorium now available for small companies (s.382 CA 06) for 28 day period , this
can be extended
administration sched b1 insolvency act 1986 –
• an alternative to liquidation
• available for insolvent companies only (B1 para 11)
• who can initiate the procedure ?
o the company
o directors
o court
o holder of floating charge (QFCH) – qualified floating charge holder – charge can float
over any asset of the company and if company fails to meet financial liabilities – fc
crystallises and can attach itself to anything of value ie company property, money
coming in etc
moving away from company act -> insolvency act 1986
information in the statute book – revise using statute book – tab for exam
court can make order when it considers –
• company is or likely to become unable to pay its debts (as per b1 para 11) AND
• making the order will achieve one or more of the following purposes –
o the rescue of the company as a going concern
o achieve a better result for creditors as a whole than should the company be wound
up
o realising property in order to make a distribution to one or more secured or
preferential creditors
procedure –
• notice by QFCH (post 15.9.03)
• Notice by directors (restricted)
In both cases notice to court OR
1. Application to court (various parties)
2. Administration order made
3. Administrator appointed
4. Creditors meeting called to approve proposals (whoever own most money – creditor –
largest creditor in relation to scored borrowing call the shots)
5. Administration take place
6. Administrator applies for discharge or variation of AO
Moratorium – created by administration
Giving company breathing space – can be put in place if court thinks appropriate
Means following action prevented
• Winding up
• Appointment of administrative receiver
• Without leave of court / consent of the administrator
Powers of the administrator –
• Para 59(1) of sched B1, IA 1986:
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