Company law I 2008 2009 semester one lecture outline I an overview of our company Law Course



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TUTORIAL 8: CORPORATE INSOLVENCY

QUESTIONS


1) Bring to the tutorial a recent newspaper story concerning insolvency. (Stories from the Internet are also satisfactory.)

2) What impact is the Enterprise Act 2002 having on insolvency proceedings? Are these developments to be welcomed?



3) New Vista Ltd was formed in 1998 to operate a window replacement business from a shop in Westcliffe. The only formally appointed directors of the company were Shane and Brian. This was the first experience either director had had of company management, although they consistently obtained business advice and instructions from Roland, a retired accountant. Roland was never formally appointed to the board as he was subject to an order under the Company Director Disqualification Act 1986. In addition to providing advice Roland had given the company a loan of £2000, repayable in 2005. Shane and Brian devoted a lot of energy to securing contracts for New Vista and carrying out work for customers. As a result they were too busy to see that proper accounts were prepared for the company. It was however Roland’s impression that the company had done well during its first year of trading as a large number of orders had been received that year and he recommended that the company should expand by opening a second shop. Shane agreed that it would be beneficial for the company to expand and persuaded Brian to go along with this. Brian was initially sceptical because he thought that the company was short of cash. Although the company had completed a lot of orders most windows were provided on credit terms and so, other than an initial deposit, many customers had not yet paid for their goods. Brian further noted that New Vista had a lot of unpaid invoices from its own suppliers. He was however persuaded by Roland’s expertise. The second shop was opened in February 2005. Unfortunately the expansion programme proved unwise. The company’s cash flow difficulties severely worsened and in order to pay its employees their wages it became necessary to resort to an account containing sums due to the Inland Revenue in respect of PAYE and VAT taxes. Moreover the company did not have enough funds to provide its most recent customers with the goods for which they had provided deposits. In August 2006 Roland insisted that New Vista should transfer ownership of the second shop to him, in satisfaction of the sums owing to him under the loan. Shortly after this was done New Vista Ltd went into insolvent liquidation. Advise the liquidator of New Vista Ltd of any potential liabilities of Brian, Shane and Roland.

READING


  1. Gower and Davies, Chapter 10; Chapter 32 and Appendix (especially pp.1196-1234)

  2. Hicks and Goo, Chapters 11(11.8 only), 15(15.3 and 15.4 only) and all of Chapter 20

  3. Business sections of daily newspapers

  4. IA 1986, ss 212-217; 238-240

  5. Company Director Disqualification Act 1986














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