Chapter 9 Multiple choice questions

. The three objectives of administration are collectively referred to as 'the purpose of administration.' What is the first objective?

To achieve a better result for the company's creditors as a whole than would be likely if the company were wound up.

To realise property in order to make a distribution to one or more secured creditors.

To rescue the company as a going concern.

To rescue the business of the company.

. During the period of administration, unless permission has been obtained from the administrator or the court, no creditor can take steps to enforce his security over the company's property. True or false?

True

False

. Regarding the proposal for a company voluntary arrangement, which ONE of the following statements is NOT true?

If the company is in administration, the proposal will be made by the administrator.

If the company is in liquidation, the proposal will be made by the liquidator.

If the company is neither in administration or liquidation, the proposal can be made by the directors.

If the company is neither in administration or liquidation, the proposal can be made by the members or creditors.

. The court cannot sanction a restructuring plan unless every meeting of the creditors or members approves of the plan.

True

False

. Which ONE of the following statements describes the difference between a members' voluntary winding up and a creditors' voluntary winding up?

If a majority of the directors make a declaration of solvency, the winding up will be a members' voluntary winding up. If no such declaration is made, it will be a creditors' voluntary winding up.

A creditors' voluntary winding up is commenced by the creditors, whereas a members' voluntary winding up is commenced by the members.

A members' voluntary winding up is commenced by passing a special resolution, whereas a creditors' voluntary winding up does not require a special resolution.

. Which ONE of the following does NOT have the right to petition the court for a compulsory winding-up order?

A member of the company.

Any creditor of the company.

The Secretary of State.

An administrator.

The directors of the company.

An official receiver.

The auditor of the company.

The company itself.

. A compulsory winding-up order can only be made on a number of specified grounds. The majority of such orders are made on the basis of which ground?

Where the company has resolved, by special resolution, to compulsorily wind up the company.

Where the company is an 'old public company.'

The company is unable to pay its debts.

Where the company does not commence business within a year from its incorporation.

Where the court is of the opinion that the company should be wound up on just and equitable grounds.

Where a company suspends its business for a whole year.

. A liquidator must distribute the company's assets in a prescribed order. Which ONE of the following states the correct order for distribution?

Liquidation expenses, preferential debts, debts secured by fixed charge, moratorium debts, debts secured by floating charge, unsecured debts, deferred debts, surplus to members.

Debts secured by fixed charge, moratorium debts, preferential debts, liquidation expenses, debts secured by floating charge, unsecured debts, deferred debts, surplus to members.

Debts secured by fixed charge, debts secured by floating charge, preferential debts, liquidation expenses, moratorium debts, unsecured debts, deferred debts, surplus to members.

Moratorium debts, liquidation expenses, preferential debts, debts secured by floating charge, unsecured debts, deferred debts, surplus to members.

. How does fraudulent trading under the Companies Act 2006 differ to fraudulent trading under the Insolvency Act 1986?

Fraudulent trading under the Companies Act 2006 can apply at any time, whereas fraudulent trading under the Insolvency Act 1986 can only apply during the course of a winding up.

Fraudulent trading under the Companies Act 2006 imposes civil liability only, whereas fraudulent trading under the Insolvency Act 1986 imposes criminal liability also.

There is no difference – both provisions are identical.

Fraudulent trading under the Companies Act 2006 only applies to registered companies, whereas fraudulent trading under the Insolvency Act can also apply to partnerships and sole proprietorships.

. Wrongful trading will only occur where, prior to the commencement of a winding up, the director knew that there was no reasonable prospect of the company avoiding insolvent liquidation. True or false?

True

False

. In October 2019, the directors of HLM plc cause the company to grant a floating charge to Matthew, a shadow director of HML plc. In March 2020, the company enters insolvent liquidation. Can the floating charge be avoided?

Yes

No

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