Deck 11: Receivership and Administration

Question 1

If a company fails to respond to a statutory demand within 21 days of being served, the court will presume the company is insolvent.

Answer 1

True

Question 2

It is generally secured creditors who can appoint a receiver, although in some limited circumstances other parties such as ASIC have the right to appoint a receiver.

Answer 2

True

Question 3

When a receiver is appointed by a secured creditor, the receiver takes control of the company thereby displacing the directors from their position.

Answer 3

False

Question 4

David has been appointed as a receiver by Bad Bank Ltd in connection with a secured loan it provided to Animals Pty Ltd. David has taken possession of the collateral and is in the process of selling it through an auction process. David needs to ensure that he takes all reasonable care to sell the property for not less than its market value, if the property has a market value, or otherwise at the best price that is reasonably obtainable, having regard to the circumstances that exist when the property is being sold.

Question 5

There are only three possible outcomes to a voluntary administration - a deed of company arrangement, apply to wind the company up or return control of the company to the board of directors.

Question 6

Jared is a secured creditor of Pineapple Ltd. Jared holds a security interest in the whole, or substantially the whole, of Pineapple Ltd's assets. Jared has standing to appoint a voluntary administrator for Pineapple Ltd.

Question 7

A deed of company arrangement is binding on all creditors, the company, its offices, its members, the administrators and the Australian Taxation Office.

Question 8

A voluntary administrator must be a registered liquidator.

Question 9

Which of the following power(s) do receivers have?

A) Take possession and control of property;
B) Commence actions against the directors for breaches of their duty to avoid insolvent trading under section 588G of the Corporations Act 2001 (Cth);
C) Vote at shareholders' meetings;
D) Take possession of property not subject to the appointer's security interest;
E) All of the above.

Question 10

Some provisions typically found in a deed of company arrangement include:

A) An extinguishment of some or all of the company's debts;
B) Restricting the power of directors;
C) The imposition of jail terms for directors that have violated section 588G of the Corporations Act 2001 (Cth);
D) An order for priority of payments of the company's debts;
E) (a), (b) and (d) are provisions typically found in a deed of company arrangement.

Question 11

Mega Bank Ltd is a secured creditor of Wasted Ltd. Wasted Ltd recently appointed a voluntary administrator. Mega Bank Ltd wants to enforce its security interest. Which of the following is the best answer?

A) Mega Bank Ltd cannot enforce its security interest because when a voluntary administrator is appointed proceedings against the company are frozen and there is a moratorium on civil proceedings against the company;
B) Mega Bank Ltd cannot enforce its security interest because secured creditors cannot do anything to enforce such interests until the company is out of administration unless its applies to the court for consent;
C) If Mega Bank Ltd perfected its security interest, it can enforce that interest at any time;
D) If Mega Bank Ltd had a security interest over all or substantially all of the assets of Wasted Ltd, it could enforce its security interest within 13 days after notice is given of the voluntary administrator's appointment;
E) In order to enforce the security ineptest, Mega Bank Ltd would need to get ASIC's consent to do so.

Question 12

Which of the following parties can appoint a voluntary administrator?

A) Unsecured creditors;
B) The company;
C) Secured creditors;
D) Shareholders;
E) A liquidator;
F) All the above;
G) Just (b), (c) and (e).

Question 13

Which of the following would not be a motivation for directors to appoint a voluntary administrator.

A) The company is insolvent or nearing insolvency and the directors are desirous of avoiding liability under section 588G of the Corporations Act 2001 (Cth);
B) The directors are attempting to prevent creditors from enforcing guarantees which have been provided by the directors;
C) The liquidator wants to have a deed of company arrangement with the company's creditors;
D) The directors want to freeze outstanding litigation so they can deal with the company's property and exercise their powers as directors without the distraction of the litigation;
E) All the above would be possible motivations for directors to appoint a voluntary administrator to a company.

Question 14

Explain the circumstances in which the court may presume that a company is insolvent for purposes of a compulsory winding up in insolvency.

Question 15

Explain what a statutory demand is and what happens if a company served with a statutory demand fails to respond.

Question 16

What is a receiver? When will a receiver be appointed?

Question 17

What is the receiver's relationship to the company?

Question 18

What are the liabilities of the Receiver?

Question 19

What is voluntary administration? What are the aims of a voluntary administration?

Question 20

What options are there for a company in voluntary administration?

Question 21

What are the effects on creditors, including secured creditors during voluntary administration?

Question 22

What is a deed of company arrangement, and what matters does it cover?

Question 23

How does the function of a court-appointed receiver differ from a privately appointed receiver?