Page 237 - DCOM106_COMPANY_LAW

Company Law

Notes
The amounts owed out by the company are found to be:
£ £
Bank (secured by a debenture) 160,000
VAT 120,000
PAYE 60,000
Other unsecured creditors 20,000 200,000
Total creditors 360,000

The adviser explains that since a change in the law on 15th September 2003 VAT and PAYE
are no longer classed as preferential creditors. The advisor prepares a statement of affairs
which (ignoring the new rules on “top slicing”) shows the order of priority of distributing
the realisable assets should a compulsory liquidation ensue.

£
Realisable value of Assets 197,000
Less: Payable to bankers under their floating charge 160,000
Surplus cash available for other creditors which total £200,000 37,000
(subject to settling liquidators costs)

Clearly the £ 200,000 of creditors could not expect much of a dividend in the liquidation
after costs were deducted from the £ 37,000 net sum available to any liquidator.
Question

Suggest the best possible way to avoid the liquidation of this company?
14.8 Summary

Winding up of a company is the process whereby its life is ended and its property
administered for the benefit of its creditors and members.

A District court is subordinate to the High Court on which jurisdiction has been so
conferred.
Winding up by the court, also called compulsory winding up, may be ordered in cases
mentioned in s.433.
The Court may order a company to be wound up if it is unable to pay its debts.
The court may also order for the winding up of a company if it is of the opinion that, it is
just and equitable that, the company should be wound up.
The court has the power to cause the assets of the company to be collected and applied in
discharge of its liabilities.

The court is empowered to make call on all or any of the contributories to the extent of
their liability.

14.9 Keywords

Committee of Inspection: The court may, at the time of making an order of winding of a company
or at any time thereafter, direct that there shall be appointed a committee of inspection to act
with the liquidator.

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