LW Global Chapter 16 Questions Company Law: Liquidations
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Sir, for Q5, why aren’t preference shares ahead of ordinary shares to be paid out after all liabilities are settled? Or is it assumed that preference shares are a payable component of existing liabilities?
I don’t understand your question! I’ve just redone the test (and scored 100%!!!!) but cannot see a question where preference shares and ordinary shares could be interchanged in a liquidation
Please repost but give me the blurb of the question and then I should be able to explain it
OK?
In question 5, it asks “which of the options would allow the holder to participate in surplus funds remaining in a liquidation after all liabilities are paid in full?” and lists ordinary shares, floating charge debentures, unsecured debentures and cumulative preference shares as the options. My doubts concern the fact that ordinary shareholders are paid from surplus funds before preference shareholders?
Dear Sir, Thank you very much for the lectures.
I don’t understand why for the Q3 (Which of the following is not a ground for the Court to grant a compulsory winding up order of a private company ?) the correct answer is: “the company has failed to obtain the a trade certificate within the first 12 month after incorporation”, but not ” the number of members has fallen below the statutory minimum”?
Thank you in advance.
Special resolution, unable to pay debts, number of members falling below statutory minimum? All these three ARE grounds for a compulsory winding up order
But failure to obtain a trading certificate for a private company? Private companies do not need trading certificates so why would a court order that a private company be wound up for some failure to take an action which it is not required to take
OK?
Hello sir, thanks for the lecture and practice exams.
But i don’t understand Q4,5
Q4. To whom is that money payable when the holder of partly paid shares pay the amount yet unpaid
Answer : ‘the company’.. I thought that it is under a liquidation, all the money need to be delivered to the liquidator.
Q5 why it the surplus goes to the one who has ordinary shares?
What does it mean by ‘debentures secured by floating charges’?
Yes Sir, do you mind to explain Q4 and Q5 please Sir?
I also answered “the liquidator” for Q4 because I thought that if the shares remain unpaid, the company has to pay it, not receive it. If you don’t mind, please correct my misunderstandings Sir, thank you.
And for Q5, based on the notes, ordinary shareholders comes last and floating charge is on the 4th order (the most prioritized one compared to other options). So could you explain why is ordinary shareholders the answer Sir? Is it because the word “surplus funds” and “all liabilities have been paid in full”, which indicates that we have paid all of the other options (floating charge, debentures, and preference shares)? Thank you very much for reading!!
The liquidator has control of the company so the money will be paid to the company under the control of the liquidator.
Where shares are only partly paid, he shareholder has to pay the balance to the company.
When everyone has been paid and there is still money left over, who do YOU think should get a share of the surplus? Somewhere within the lectures I must surely have said that it’s the equity shareholders that carry the greatest risk and it’s they that will share any surplus funds
OK?
thank you very much Sir!! ?
in Q1 company need to pass special resolution for liquidation.
May you advise what other situations that company need to pass special resolution? and which situation only need the ordinary resolution in overall of LW GLO paper. Thanks
You’ll never be asked to list those resolutions that need to be passed as special – I believe that there are around 16 / 20 of them
Most business carried out at an AGM requires only an ordinary resolution
Where it fits into a lecture I have identified the requirement for a special resolution but nowhere have I listed all those matters that need a special resolution
I’ve just checked on Google and see a list of 15
OK?