Question 1

The terms 'controller' and 'receiver and manager' are both used in the Corporations Act:

Accepted Answer

According to the Corporations Act, a controller is a person appointed under a security interest or a court order to manage property of a company. On the other hand, a receiver and manager is a person appointed by a secured creditor to take control and manage the assets of a company. Therefore, receivership and management is a narrower concept than controllership. However, controllership can also include administrators appointed under a deed of company arrangement, which makes it a wider concept than receivership and management.

Question 2

For a company that is likely to be liquidated, a voluntary administration is mainly designed to:

Accepted Answer

Voluntary administration is a process where an external administrator is appointed to evaluate the financial position of the company and to determine the best possible outcome for creditors. The main objective of voluntary administration is to provide the best possible outcome for creditors, as opposed to providing a return for shareholders or protecting the interests of management. Therefore, choice B is the best answer as it provides the best return for creditors.

Question 3

Which of the following would not normally be included in a deed of arrangement:

Accepted Answer

A deed of arrangement typically includes provisions for the payment of creditors, details on how company assets will be used for repayment, circumstances that may trigger the termination of the deed, and the name of the administrator overseeing the arrangement. However, a list of shareholders would not typically be included in the deed.

Question 4

A receiver is always appointed under a deed of arrangement.

Accepted Answer

A receiver may or may not be appointed under a deed of arrangement, it depends on the specific terms of the arrangement.

Question 5

The adopting of a deed of arrangement is the possible outcome of:

Accepted Answer

A deed of arrangement is a legally binding agreement between a company and its creditors that sets out how the company will pay its outstanding debts. It is typically used as part of a voluntary administration process, which is when a company seeks protection from its creditors while a restructuring plan is developed. Therefore, the possible outcome of adopting a deed of arrangement is voluntary administration.

Question 6

A receiver must be a registered company liquidator.

Accepted Answer

A receiver is a person appointed by the court to take control of the assets of a company that is in financial difficulty. A registered company liquidator is a person who is qualified to liquidate companies. Therefore, a receiver must be a registered company liquidator.

Question 7

Which of the following cannot instigate a voluntary administration:

Accepted Answer

The answer of Which of the following cannot instigate a...

Question 8

Which of the following are legitimate reasons for a company to be liquidated?
$\quad$I.$\quad$Because the company is expected to fail
$\quad$II.$\quad$Because it is believed that the directors are abusing their power
$\quad$III.$\quad$Because the shareholders want their capital returned

Accepted Answer

All three reasons are legitimate grounds for a company to be liquidated. A company may be liquidated if it is expected to fail to protect creditors and shareholders. If directors are abusing their power, liquidation can protect the company's assets and stakeholders. Lastly, if shareholders wish to have their capital returned and the company is solvent, liquidation can distribute the assets back to them.

Question 9

A company's auditor can act as a receiver for the companies property.

Accepted Answer

An auditor's primary role is to provide an independent examination of the financial statements, which enhances the degree of confidence of intended users. Acting as a receiver for the company's property would create a conflict of interest, compromising their independence.

Question 10

Which of the following is either a power or a function of a receiver:
I.$\quad$to take possession of designated company assets
II.$\quad$to instigate action to recover any shortfall from the directors
III.$\quad$to collect revenue generated by the assets and meet expenses in generating the revenue
IV.$\quad$To do all things necessary to protect the property

Accepted Answer

A receiver's powers and functions include taking possession of designated company assets (I), collecting revenue generated by the assets and meeting expenses in generating the revenue (III), and doing all things necessary to protect the property (IV). However, instigating action to recover any shortfall from the directors (II) is not a power or function of a receiver; that would be the responsibility of the company's creditors or other stakeholders. Therefore, the correct choice is D, I, III, and IV only.

Question 11

The appointment of a receiver invariably results in the dissolution of the company.

Accepted Answer

The appointment of a receiver does not necessarily result in the dissolution of the company. The receiver is appointed to take control of the company's assets and operations in order to repay debts or restructure the company. If successful, the company can continue operating. However, if the receiver determines that there is no viable path forward, they may recommend dissolution or liquidation of the company.

Question 12

The director's powers cease and are not returned to the directors under a:

Accepted Answer

In a liquidation, the company is being wound up and its assets are being sold off to pay its debts. The director's powers cease and are not returned to the directors as the company is being dissolved. In contrast, voluntary administration and receivership are forms of external administrations where the director may have some control or involvement in the process.

Question 13

Which of the following appointments normally has power over the company's operations?
I.$\quad$Receiver
II.$\quad$Receiver and Manager
III.$\quad$Liquidator

Accepted Answer

Of the three appointments, only the Receiver and Manager has power over the company's operations. A Receiver appointed under a floating charge only has power over the charged assets, while a Liquidator's authority is limited to winding up the affairs of the company. Therefore, the correct choice is II and III only.

Question 14

There is no disclosure of the fact that a company is under external administration.

Accepted Answer

According to most legal jurisdictions, companies under external administration are required to disclose this fact to shareholders, creditors, and the public. This usually includes publishing notices in newspapers or on the company's website, as well as filing official documents with relevant government agencies. Failure to disclose this information can lead to legal penalties and may also damage the company's reputation.

Question 15

In which of the following ways can a receiver be appointed?
I.$\quad$by special resolution of the shareholders
II.$\quad$by a court order
III.$\quad$by a lender under the terms of a debt contract
IV.$\quad$by an ordinary resolution of the shareholders

Accepted Answer

A receiver can be appointed by a court order or by a lender under the terms of a debt contract. The appointment cannot be made by an ordinary resolution of shareholders unless the company's articles of association provide for it. However, a receiver can be appointed by special resolution of shareholders in certain circumstances, such as in a voluntary winding up. Therefore, options I and IV are not always applicable.

Quiz 12: Receivership and Voluntary Administration

The terms 'controller' and 'receiver and manager' are both used in the Corporations Act:

For a company that is likely to be liquidated, a voluntary administration is mainly designed to:

Which of the following would not normally be included in a deed of arrangement:

A receiver is always appointed under a deed of arrangement.

The adopting of a deed of arrangement is the possible outcome of:

A receiver must be a registered company liquidator.

Which of the following cannot instigate a voluntary administration:

Which of the following are legitimate reasons for a company to be liquidated? $\quad$ I. $\quad$ Because the company is expected to fail $\quad$ II. $\quad$ Because it is believed that the directors are abusing their power $\quad$ III. $\quad$ Because the shareholders want their capital returned

A company's auditor can act as a receiver for the companies property.

The appointment of a receiver invariably results in the dissolution of the company.

The director's powers cease and are not returned to the directors under a:

Which of the following appointments normally has power over the company's operations? I. $\quad$ Receiver II. $\quad$ Receiver and Manager III. $\quad$ Liquidator

There is no disclosure of the fact that a company is under external administration.

In which of the following ways can a receiver be appointed? I. $\quad$ by special resolution of the shareholders II. $\quad$ by a court order III. $\quad$ by a lender under the terms of a debt contract IV. $\quad$ by an ordinary resolution of the shareholders

Quiz 12: Receivership and Voluntary Administration

The terms 'controller' and 'receiver and manager' are both used in the Corporations Act:

For a company that is likely to be liquidated, a voluntary administration is mainly designed to:

Which of the following would not normally be included in a deed of arrangement:

A receiver is always appointed under a deed of arrangement.

The adopting of a deed of arrangement is the possible outcome of:

A receiver must be a registered company liquidator.

Which of the following cannot instigate a voluntary administration:

Which of the following are legitimate reasons for a company to be liquidated? \quad I. \quad Because the company is expected to fail \quad II. \quad Because it is believed that the directors are abusing their power \quad III. \quad Because the shareholders want their capital returned

A company's auditor can act as a receiver for the companies property.

The appointment of a receiver invariably results in the dissolution of the company.

The director's powers cease and are not returned to the directors under a:

Which of the following appointments normally has power over the company's operations? I. \quad Receiver II. \quad Receiver and Manager III. \quad Liquidator

There is no disclosure of the fact that a company is under external administration.

In which of the following ways can a receiver be appointed? I. \quad by special resolution of the shareholders II. \quad by a court order III. \quad by a lender under the terms of a debt contract IV. \quad by an ordinary resolution of the shareholders

Which of the following are legitimate reasons for a company to be liquidated? $\quad$ I. $\quad$ Because the company is expected to fail $\quad$ II. $\quad$ Because it is believed that the directors are abusing their power $\quad$ III. $\quad$ Because the shareholders want their capital returned

Which of the following appointments normally has power over the company's operations? I. $\quad$ Receiver II. $\quad$ Receiver and Manager III. $\quad$ Liquidator

In which of the following ways can a receiver be appointed? I. $\quad$ by special resolution of the shareholders II. $\quad$ by a court order III. $\quad$ by a lender under the terms of a debt contract IV. $\quad$ by an ordinary resolution of the shareholders