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Liquidations Test

Liquidations Test. Planning.

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Liquidations Test

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  1. Liquidations Test Planning

  2. You act as Liquidator in an MVL. You have just received a claim which, if valid, means there will be insufficient funds to pay the interest on creditors’ claims in full. The creditor is not shown in the statement of assets and liabilities in the Declaration of Solvency. • What immediate practical steps should you take? • What legal and procedural steps should you take as Liquidator if the problem cannot be resolved? • What are the consequences for the Liquidator? (4 marks)

  3. 2. You are acting as Liquidator in a CVL. All liabilities are unsecured. The Bank (who is owed monies from the Company’s overdrawn current account) has submitted a claim for £10,000. You notice that the Bank has the benefit of a personal guarantee from the sole director. You have received a further claim from a firm of solicitors acting on behalf of the director with the following letter: Mr Liquidator My client has received a demand from the Bank for £10,000. As guarantor he is a subrogated creditor. I enclose a proof of debt for £10,000. Yours sincerely Solicitor • Explain with reasons whether or not the solicitor is correct. (4 marks)

  4. 3. Banana Ltd entered CVL with the only asset being a debt from Apple Ltd. Two weeks before your appointment as Liquidator the business and assets had been purchased by Apple. The outstanding debt represents the balance of deferred consideration from the sale. The sales agreement states that all but two creditors were to be paid by Apple. The statement of affairs indicates that H M Revenue & Customs and the Landlord are the only two remaining creditors and there is little chance of a dividend to creditors. There are no secured creditors. • What issues should be considered by the Liquidator and what are the remedies available? (4 marks)

  5. 4. Jumper Ltd entered into an agreement with Pullover Ltd, a major supplier and creditor, for financial restructuring. £30,000 was advanced by Pullover. This was repayable in £5,000 monthly instalments by Jumper. Despite letters of demand, no monies have ever been received by Pullover. The MD of Pullover has telephoned you for advice as he has heard that the assets are disappearing and they hold no security. He was told this by the Director of Sweater Ltd, a wholesaler, who has been repossessing stock for the last week. • Advise on the immediate actions Pullover can take to prevent assets from further dissipation and on the procedures involved. What are the risks of Pullover taking immediate action? (8 marks)

  6. 5. State the problems that are caused by the backlog of insolvency cases. In relation to delegation and control of cases, state the main points that are recommended to be addressed in the published guidance. (6 marks)

  7. State the practical, legal and regulatory steps that need to be taken to close a cvl where: • there are funds to distribute to unsecured creditors • there is no fixed or floating security. (11 marks)

  8. 6. Your agent has contacted you after finding some asbestos in the factory you sold recently. What action should you take? (3 marks)

  9. NOW HAVE A GO AT LIQUIDATION QUESTIONS ONE AND TWO IN 2007!!!

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