338 21: Insolvency and administration Part G Legal implications of companies in difficulty or in crisis
Quick Quiz
1 Complete the following definition
Liquidation means that a company must be .............................. and its affairs wound up.
2 Name three common effects of liquidations.
(1) ............................................................................................................................................................
(2) ............................................................................................................................................................
(3) ............................................................................................................................................................
3 What are the two most important grounds for compulsory liquidation?
(1) ............................................................................................................................................................
(2) ............................................................................................................................................................
4 A members' voluntary winding up is where the members decide to dissolve a healthy company.TrueFalse^5 Name two advantages of administration.
(1) ............................................................................................................................................................
(2) ............................................................................................................................................................Answers to Quick Quiz
1 Dissolved
2 (1) No further changes in membership permitted
(2) All documents must state prominently that company is in liquidation
(3) Directors' power to manage ceases
3 (1) Company is unable to pay its debts
(2) It is just and equitable to wind up the company
4 True. Members can decide to wind up a healthy company.
5 (1) It does not necessarily result in the dissolution of the company
(2) It prevents creditors applying for compulsory liquidation
Subsidiary advantages are
(3) All creditors can apply for an administration order
(4) The administrator may challenge past transactions of the company(^) Now try the questions below from the Practice Question Bank
Number
47, 48