Flashcards in Live Session 2 - Proxy, Proof of Debt, Distributions, Remuneration Deck (36)
What is a proxy and when should they be issued
Authority given by one person to another to attend, speak and vote as his representative at a meeting.
All notices convening a meeting must enclose a proxy form
A proxy must comply with the following rules in order to be valid
1. Must be received by the time and date specified in the notice of the meeting.
2. Proxy must be authenticated by principal or on behalf of authorised signatory - the relationship of authorised signatory must be stated on form
3. Proxy can be used at an adjourned meeting
4. Principal may revoke proxy at will
5. Faxed/ E-mailed proxies ARE valid for voting purposes
6. Chairman has no discretion to permit vote when there is a failure to lodge proxy.
7. If proxy represents corporation it must present authority for him to act as proxy at the meeting
What can the proxy holder not do (hint - when chairman is nominated as proxy)
Proxy holder cannot vote in favour or any resolution that would allow him and his associates to receive any remuneration out of the estate unless the proxy had specifically directed him to vote this way.
What is the threshold for being required to submit a proof of debt
Creditors owed less than £1,000 do not need to submit a proof of debt to prove claim. BUT - they will not be permitted to vote unless they have submitted one.
What information must be included in a proof of debt
1. Company name, address and registered number
2. Total amount of claim, including VAT at the date the company entered administration. LESS, any payments made after that date in respect of claim, and any deductions for valid set off
3. Whether or not the claim includes outstanding uncapitalised interest
4. Particulars of how and when the debt was incurred by company
5. Particulars of any security held, including date given and value creditor puts on it.
6. Name and address of person authenticating form.
What else should be submitted to prove claim
Any documents which can help to substantiate the proof. Administrator may call for documentary evidence where required.
Who may inspect proofs
1. Any creditor who has submitted a proof which has not been wholly rejected
2. Any contributory
3. Any representative of the above
What are the tax consequences of administration
Administration begins a new tax period. Earlier losses cannot be carried forward to set off against any capital gain incurred on disposal of assets.
If administrator trades profitably, corporation tax payable is an expense of the administration.
Interest earned during the administration will be taxed and be an expense of the administration
How can capital gains tax be mitigated
If assets are sold prior to the administration, the tax liability will rank as an unsecured claim in the administration.
Does an administrator need Court sanction to make distributions
No. Administrator can pay secured, prefs and prescribed part payment to unsecured creditors without seeking leave of court to do so.
Administrator will need Court approval to pay distributions to unsecured creditors above the prescribed part.
Who do preferential creditors receive distributions in priority to
As in a winding up, pref creditors will rank in priority to holders of floating charge.
What other payments can an administrator make without the need to seek court approval
Administrator may make any payment which is necessary or incidental to the performance of their duties.
What happens to amounts due to employees retained by the administrator
They are paid as an expense of the administration. On leaving office, any amounts outstanding to employees must be settled by administrator in priority to his remuneration and floating charge holders.
What conditions are attached to payments from realisation of fixed charge assets
Administrator may realise fixed charge assets with leave of court if selling them is consistent with purpose of administration. A condition of the Court order to approval the sale is that the administrator must pay the charge holder the higher of net sale proceeds or market value. Where the sale proceeds are less than market value, administrator must make up the shortfall.
What options does an administrator have when adjudicating claims
1. Admit in full
2. Admit in part
3. Reject in full
When are debts valued and characterised
The date of appointment rather than date of adjudication or creditors meeting.
What is the exception to valuing debts as at the date of appointment
If administrator allows an unliquidated claim to be admitted based on the estimated minimum value of a claim, administrator should take account of the events occurring between date of appointment and date of meeting
What should an administrator do if they reject a claim - in full or in part
Send creditor a written statement giving reasons for rejection
What recourse does a creditor have if their claim is rejected
If creditor is dissatisfied with the administrator's decision, they have 21 days from receipt of rejection statement to apply to court to challenge the decision.
What other rights do creditors have regarding admission or rejection of claims
ANY CREDITOR may appeal admission or rejection of claims by administrator within 21 days of become aware of administrators decision,.
Can a claim be amended or withdrawn
Yes. Proof may be amended or withdrawn at any time by agreement between creditor and administrator
How does an administrator deal with debts payable at a future time.
For purposes of dividend, they apply a discount formula - x/ 1.05n
x = value of admitted claim
n = period beginning with the relevant date an ending on date debt would otherwise be due. It is expressed in years and months in decimal form.
What is the effect of discounts on a claim
All trade and other discounts should be deducted from claim.
Exception to this is where discount is given for immediate/ early/ cash settlement
What happens if secured assets don't realise enough to pay secured creditor
Secured creditor may prove for any balance remaining after deducting amounts realised for security
What if the creditor also owes the company in administration funds
Mutual set off applies. We owe £200, they owe £100, they may prove claim for remaining £100
How are foreign currency debts treated
Debt must be converted into sterling using official exchange rate on DATE OF APPOINTMENT
How are claims periodical payments (i.e rent) dealt with
Creditor may only prove for amounts DUE and UNPAID up to the date of administration.
Is a creditor allowed to apply interested to unpaid balances
Yes - interest may be included in claim up to the date of administration - post administration interest is not provable.
how much notice must be given by administrator for notice of intended dividend and to give creditors final chance to prove claims.