Where a company is unable to pay its debts as and when they fall due for payment in the ordinary

500 WordsApr 23, 20192 Pages
Where a company is unable to pay its debts as and when they fall due for payment in the ordinary course of business and is deemed to have ‘fallen from grace’, the debtor would be technically insolvent and must apply for voluntary liquidation or a creditor may make a statutory demand for payment under Section 9 of the Insolvency Act. They are no longer in a position to handle their own estate’s affairs. In the liquidation of the estate of an insolvent person, a trustee is appointed to oversee all activity of the insolvent and act on their behalf. A trustee or liquidator is appointed to investigate the debtor’s financial affairs, establish the reason why the debtor is in the insolvent position, investigate possible offences, and identify…show more content…
The trustee or liquidator must keep separate financial records for each bankruptcy or liquidation, and these are open to inspection by the committee of creditors. There must be sufficient residue to cover all costs of sequestration including legal fees, curator fees, and remuneration for the trustee and distribution costs . Section 74 of the Insolvency Act also allows the trustee to continue and run the debtor’s business on his behalf until the debtor company is fully rehabilitated. In that instance the purpose is to sell the assets of the liquidated company either as a going concern or piecemeal, whichever would in the opinion of the trustee or liquidator be to benefit the committee of creditors. Completion of administration The actual sale of the property is done by way of public auction as provided for by Section 77 of the Insolvency Act. At the end of the liquidation, when a trustee or liquidator has released and distributed all the assets, they will arrange a final meeting of creditors. They will send notice of this meeting to all creditors they are aware of, as stipulated in Section 100(2) of the Insolvency Act. At this meeting, the trustee or liquidator will report on what they did during the bankruptcy or liquidation and will give creditors a summary of their receipts and payments. After the

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