Page 231 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Accounting for Companies – II

notes 3. Commencement of a phoenix company – the directors of Protecta decide that they
do not wish to propose a CVA but instead wish to incorporate a restart phoenix
company. They decide that they do not want to acquire the vans and fixtures owned
by Protecta – instead the successor company buys new. In these circumstances the
directors will face an uncertain financial position as they will need to purchase the
“goodwill” of the business from the ultimate liquidator of Protecta Limited.

Question
Discuss the options your company has if a compulsory liquidation threatens.
Source: http://www.purnells.co.uk/limited-company/compulsory-liquidations/case-study-compulsory-liquidation.html

10.6 summary

l z Liquidator’s statement of account of the winding up is prepared for the period starting
from the commencement of winding up to the close of winding up.
l z If winding up of company is not concluded within one year after its commencement,
Liquidator’s statement of account pursuant to section 551 of the Companies Act, 1956 (Form
No. 153) is to be filed by a Liquidator within a period of two months of the conclusion of
one year and thereafter until the winding up is concluded at intervals of not more than one
year or at such shorter intervals, if any, as may be prescribed.
l z The number of business liquidations is steadily increasing, and the structure of each
liquidation may vary depending upon the particular statutes invoked.

l z As the precise type of liquidation can affect a party’s rights and ultimate recovery, troubled
businesses contemplating liquidation and those doing business with companies that may
be forced into liquidation are advised to seek counsel regarding the various methods of
liquidation available.
l z It is vital that, in the period between the calling of these meetings and actually holding
them, the directors (who remain in control of the company) exercise appropriate caution
and take the advice of the proposed Liquidator.
l z There is no embargo on continued trading, although the company cannot accept deliveries
of goods for which it has not made provision for payment.

l z It is necessary, during this period, not to improve or worsen the position of any individual
creditors, or to dissipate any of the assets, otherwise the directors could have either personal
liability or be culpable for misfeasance.

l z In particular, it is vital to ensure that assets that ought to be made available to the Liquidator
do not fall into the hands of creditors and thus become available for set off.

10.7 keywords

Bankruptcy: Bankruptcy is a legal proceeding that relieves a debtor of all or some of the debts
the owe.
Contributory: A contributory means a person liable to contribute to the assets of the company in
the event of its being wound up and includes holders of shares which are fully paid.
Creditors Voluntary Liquidation: It is a voluntary liquidation where the directors cannot make
the Statutory Declaration of Solvency necessary for a Member’s Voluntary Liquidation.
Fraudulent Trading: This is where it can be demonstrated that the business of the company has
been continued with a view to defrauding the creditors.

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