Group assignment subject legal english advanced 1

Definition of insolvency Insolvency is a term for when an individual or company can no longer meet their financial obligations to lenders as debts become due.1 Before an insolvent compan

BỘ TƯ PHÁP TRƯỜNG ĐẠI HỌC LUẬT HÀ NỘI

GROUP ASSIGNMENT

SUBJECT: LEGAL ENGLISH ADVANCED 1

TOPIC: BANKRUPTCY

Hà Nội, 2022

1

BIÊN BẢN XÁC ĐỊNH MỨC ĐỘ THAM GIA VÀ KẾT QUẢ THAM GIA LÀM BÀI TẬP

NHÓM

Ngày: 08 / 03 /2022 Địa điểm: Trường Đại học Luật Hà Nội

Nhóm số: 02 Lớp: N03 Khoa: Ngôn Ngữ Anh Khoá: 44

Tổng số sinh viên của nhóm: 04

 Có mặt: 04

 Vắng mặt… Có lý do:… Không có lý do…

 Nội dung: Bankruptcy

Tên bài tập: Bài tập nhóm

Môn học: Legal English Advanced 1

Xác định mức độ tham gia và kết quả tham gia của từng sinh viên trong việc thực hiện bài tập nhóm với kết quả như sau:

ST

T

MÃ

SV

CỦA SV

SV KÝ TÊN

ĐÁH GIÁ CỦA GV

M (số)

ĐIỂM (Chữ)

GV (Ký tên)

1 44301

2

Đỗ Thùy Dương 

2 44301

5

Nguyễn Thị Hải Yến 

3 44302

6

Nguyễn Nhật Quang 

4 44302

8

Bùi Hương Giang 

Hà Nội, ngày 08 tháng 03 năm 2022

Kết quả điểm bài viết: NHÓM TRƯỞNG

Kết quả điểm thuyết trình:………. Quang

Điểm kết luận cuối cùng:……… Nguyễn Nhật Quang

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INTRODUCTION 4

CONTENT 4

I AN OVERVIEW OF BANKRUPTCY 4

1 Definition of insolvency 4

2 Features of insolvency 5

3 Definition and legal consequences of winding up 5

II In the UK 5

1 Types of insolvency proceedings 5

1.1 Liquidation or Winding up 6

1.2 Administration 6

1.3 Receivership 7

1.4 Company voluntary arrangements and schemes 8

2 Winding up proceedings 9

2.1 Voluntary Liquidation 9

2.2 Compulsory Winding-up 11

III IN VIETNAM 11

1 Voluntary liquidation outside insolvency proceedings 12

2 Voluntary liquidation in insolvency proceedings 12

IV Similarities and Differences between bankcruptcy in Vietnam and in the UK 15 1 Similarities 15

2 Differences 16

CONCLUSION 17

REFERENCES 18

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Bankruptcy is a status in which a company or enterprise has financial difficulties, suffers losses or liquidates the enterprise, which cannot guarantee to pay the total amount due At that time, a court or a competent jurisdiction will declare the company

or enterprise bankrupt Bankruptcy in companies and businesses across countries, especially the UK and Vietnam, is not strange, even happens a lot Thus, there are many ways that lead to these situations such as insolvency and winding up However, there are many differences in these actions in certain countries, especially in the UK and in Vietnam

CONTENT

I AN OVERVIEW OF BANKRUPTCY

1 Definition of insolvency

Insolvency is a term for when an individual or company can no longer meet their financial obligations to lenders as debts become due.1 Before an insolvent company or person gets involved in insolvency proceedings, they will likely be involved in informal arrangements with creditors, such as setting up alternative payment arrangements Insolvency can arise from poor cash management, a reduction in cash inflow, or an increase in expenses

According to another opinion, insolvency is defined as a financial condition in which the total liabilities of an individual or enterprise exceed the total assets so that the claims of creditors cannot be paid There are essentially two approaches in determining insolvency: insolvency in the equity sense and under the balance-sheet approach Insolvency in the equity sense denotes the inability of the debtor to pay his debts as they become due in the ordinary course of business Insolvency under the balance-sheet approach means that the total liabilities of the debtor exceed his total assets

1 See: https://www.britannica.com/topic/insolvency (Accessed on March 6th 2022)

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2 Features of insolvency

Firstly, insolvency is a state of financial distress in which a person or business is

unable to pay their debts;

Secondly, insolvency in a company can arise from various situations that lead to

poor cash flow; when faced with insolvency, a business or individual can contact creditors directly and restructure debts to pay them off

3 Definition and legal consequences of winding up

Winding up is a means by which the dissolution of a company is brought about and its assets realized and applied in payment of its debts, and after satisfaction of the debts, the balance, if any, remaining is paid back to the members in proportion to the contribution made by them to the capital of the company The liquidation or winding up

of a company is the process whereby its life is ended and its property is administered for the benefit of its creditors and members.2

Thus, winding up ultimately leads to the dissolution of the company In between winding up and dissolution the legal entity of the company remains and it can be sued in

a court of law

II In the UK

1 Types of insolvency proceedings

Insolvency proceedings3 are formal measures taken to deal with company debt It’s important to note that not all companies involved in insolvency proceedings are insolvent

There are four principal types of insolvency proceedings applicable to

corporations in the UK – administration, receivership, liquidation, and company

voluntary arrangements and schemes

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which are governed by the Insolvency Act 1986 (the Insolvency Act) and the Insolvency Rules (England and Wales)

2016 (the Insolvency Rules);

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1.1 Liquidation or Winding up 4

Compulsory liquidation is liquidation by order of the court and is the only method

by which a creditor can initiate liquidation Creditors’ voluntary liquidations (insolvent) and members’ voluntary liquidations (solvent) are also possible but require shareholder approval Once the liquidation has been completed, the company is dissolved There are three types or winding up: compulsory liquidation and Members and Creditors voluntary liquidation All three types are designed to bring the existence of a company

to an end and to distribute its assets to those entitled to them

There are two forms of liquidation, also known as winding-up, under the

Insolvency Act: (1) compulsory liquidation, by order of the court; and (2) voluntary

liquidation, which is divided into a members' voluntary liquidation (MVL) or a creditors' voluntary liquidation (CVL) An MVL is a solvent liquidation and requires a statutory declaration of solvency from the company's directors within the five weeks immediately preceding the date of the resolution for winding-up A CVL can be a solvent or insolvent liquidation, but is subject to some degree of control by creditors

Liquidators (and administrators) have the ability to challenge various payments or transfers of interests in property of the debtor within certain periods prior to the insolvency to ensure the equality of distribution to creditors of the debtor The periods are typically between six months and two years, depending on the nature of the challenge Court proceedings are generally required to reverse the transactions

1.2 Administration 5

Administration is the most common of the insolvency procedures Administration provides breathing space to allow a rescue package or more advantageous realization of assets to be put in place An administrator is appointed to manage a company’s affairs, business and property for the benefit of the creditors The person appointed must be an insolvency practitioner and have the status of an officer of the court

4 Insolvency Act, Section 89.

5 Insolvency Act, Schedule B1 Paragraphs 43 and 44 Exceptions include contractual set-off rights (at least until the administrator makes an authorised distribution) and secured creditors' rights to enforce against certain collateral to which the Financial Collateral Arrangements (No 2) Regulations 2003 (SI 2003/3226) apply, including shares.

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The objective of administration is to:

Firstly, rescuing a company as a going concern;

Secondly, achieving a better price for the company’s assets or otherwise realizing

their value more favorably for the creditors as a whole than would be likely if the company were wound up (without first being in administration);

Thirdly, in certain circumstances, realizing the value of property in order to make

a distribution to one or more preferential creditors – receivers

An administration can, depending on the circumstances, be initiated by application to the court or by an out-of-court procedure The company or its directors, the company’s creditors and certain other stakeholders can, subject to various conditions, initiate the process A company need only show it is, or is about to become, unable to pay its debts

Because commencement of administration proceedings imposes a moratorium on all claims against a company, it is frequently used as a restructuring tool ‘Pre-pack’ administrations, in which a pre-negotiated sale of a company’s business and assets is effected immediately on commencement of the process, are commonly used to salvage value from insolvent companies

1.3 Receivership 6

Receivership is technically an out-of-court enforcement mechanism generally used by a secured creditor when a company is insolvent rather than an insolvency proceeding or a method of restructuring There are two types of receiverships under UK law

- Administrative receivership

This method is not offered for most types of transaction An administrative receiver is a receiver or manager of the whole, or substantially the whole, of a

https://www.lexisnexis.com/uk/lexispsl/construction/document/391372/56NS-GV31-F186-30M6-00000-00/Types%20of%20insolvency%E2%80%94overview (Accessed on March 08 th 2022)

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company’s property They’re appointed by, or on behalf of, the holders of any debentures of the company secured by a floating charge They have the power to sell the assets covered by the floating charge and apply the proceeds to the debt owed to the charge-holder Receivers who are not administrative receivers may be appointed in other circumstances For example, under powers contained in an instrument or document creating a charge over a company’s property, a receiver or manager may be appointed until the debt is recovered

The function of an administrative receiver is to realise the charged assets and to repay the chargeholder An administrative receiver can, and often will, take over the management of a company and sell the charged assets as a going concern for the benefit

of the charge holder The remaining company will then be liquidated or dissolved

- Fixed charge receivership

The second type of receivership proceeding is also known as the Law of Property Act (LPA) receivership as the powers and duties of this type of receiver are still governed by the Law of Property Act 1925 It is an enforcement mechanism used by holders of fixed charges, principally over real estate, to sell the charged assets and repay the chargeholder The powers of an receiver are more limited than an administrator or administrative receiver but given that their duties are less extensive and there is no court involvement, they can often be appointed more quickly and cheaply

1.4 Company voluntary arrangements and schemes

A company voluntary arrangement (CVA) is an arrangement that a company enters into with its creditors under the supervision of an insolvency practitioner, the nominee The aim of this is to prevent the company entering liquidation and ultimately being dissolved The company will still exist and usually continue to trade The aim of the CVA is to prevent the company entering liquidation and ultimately being dissolved.7

Moreover, consensual out-of-court restructurings are common in the UK Company voluntary arrangements (CVAs) or schemes of arrangement (Schemes) may

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also be used with the approval of the requisite majorities Both of these require filings at court, and the latter also requires court hearings

Once put to a vote, a CVA proposal will be implemented if:

a approved by 75 per cent or more (by value) of the company's creditors; and

b not rejected by more than 50 per cent (by value) of the company's creditors admitted for voting who are “unconnected creditors”.8

A CVA or Scheme does not trigger a moratorium on creditors’ actions (except, in the case of a CVA in respect of a small company and certain other exceptions) A CVA

or Scheme is sometimes combined with the administration to take advantage of the moratorium provided on administration CVAs have been used very effectively in distressed retail insolvencies to limit exposure to landlords of overrented and superfluous premises

2 Winding up proceedings

2.1 Voluntary Liquidation 9

There are two main types of voluntary liquidation and it is imperative to understand which applies to the company's situation If a company is insolvent, which is known as Member Voluntary Liquidation (MVL), however, if the business cannot hope

to pay its debtors, the procedure will be known as Creditors’ Voluntary Liquidation (CVL)

- Members’s Voluntary Liquidation (MVL)

When it is deemed that the directors have made a full enquiry into the company’s financial affairs and the company is in fact solvent, the first step in winding up a company is to hold a meeting of the board From there, there are several phases leading

up to liquidation and striking a business off the register The process generally follows these steps:

8

Insolvency Act, Section 5(2)(b); the Insolvency Rules, Rule 15.34

9 Insolvency Act, Section 89

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Step 1: Meeting of the Board of Directors to resolve to draw up a Declaration of

Solvency

Step 2: Extraordinary General Meeting of shareholders with 14 days notice

Step 3: Liquidator is appointed and will handle statutory filings and notices

Step 4: All taxes are prepared and filed throughout the winding up process through to

liquidation

Step 5: Assets are liquidated per schedule

Step 6: Shareholder meeting for the final report

- Creditors’ Voluntary Liquidation (CVL)

If the company is insolvent or the majority of directors cannot agree on a Declaration of Solvency, winding up would utilize a Creditors’ Voluntary Liquidation procedure They are quite similar in terms of time constraints and statutory filings, but the emphasis throughout a CVL is on the creditors There may be nothing left at the end

of liquidation to distribute to shareholders simply because an insolvent company sought

to be wound up Also, there are times when a majority of directors have signed the Declaration of Solvency only to find out later in the process that the company was not

in fact solvent In this case an MVL would automatically become a CVL The main difference in procedure is that there must be a meeting with the creditors in a CVL since the company is insolvent and cannot satisfy its debts.10

2.2 Compulsory Winding-up 11

A company can be legally forced to wind up by a court order In such cases, the company is ordered to appoint a liquidator to manage the sale of assets and distribution

of the proceeds to creditors Compulsory winding up involves the following:

10 See: https://www.ukliquidators.org.uk/company-liquidation/creditors-voluntary-liquidation-cvl#:~:text=A%20CVL%20is

%20a%20director,placing%20it%20into%20a%20CVL (Accessed on March 08 th 2022)

11 Insolvency Act, Section 1.

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