Titan Europe 2007-1 (NHP) Limited - Irish Stock Exchange

Liquidation. A company can be wound up at the instigation of the company itself, its members or
contributories, its directors, its creditors or certain overseas liquidators. Voluntary winding-up proceedings are
initiated when the company in general meeting passes a resolution to that effect. If the directors make a
declaration that the company will be able to pay its debts within 12 months the proceedings take effect as a
members’ voluntary winding up. If they are unable to make such a declaration the proceedings take effect as a
creditors’ voluntary winding up. A members’ winding-up is voluntary and generally relates to cessations of a
solvent business. A creditors’ voluntary winding up requires proof of the company’s inability to pay its debts
(as outlined above). Involuntary winding up proceedings are by court order at the instigation of the company,
its creditors, directors, contributories or a previously appointed administrator or administrative receiver. The
inability of a company to pay its debts is one of several grounds upon which a winding up order may be
obtained from the Court. For example, an order may be made if the court considers it just and equitable to wind
up the company.
A liquidator (a licensed insolvency practitioner) appointed to an insolvent company will examine the
validity and priority of all claims and is required by the Insolvency Act to distribute the assets of the company
over which he is appointed in accordance with a statutory order of priority. This priority recognises the rights of
secured creditors subject to the matters described above, and does not override or prevent the appointment of a
receiver to realise secured assets on behalf of a secured creditor. It should be noted that, following a recent
House of Lords judgment, the costs and expenses of a liquidation will rank after sums payable to both
preferential creditors and to holders of floating charges and will not be payable ahead of the floating charge
security.
When a winding up order has been made by the Court in respect of a company or a provisional liquidator
has been appointed, no action or proceeding may be proceeded with or commenced against the company or its
property, except with leave of the court and subject to such terms as the court may impose. Specific court
orders can be obtained to stay any actions or proceedings brought against a company and its property. However,
the rights of secured creditors are unaffected and they may still enforce their security rights, for example by the
appointment of a receiver over specific property or assets of the company.
Liquidators are given extensive statutory powers to challenge certain transactions made in prescribed
periods prior to the insolvency of the company, described in more detail in the section headed “—Challenges to
Antecedent Transactions on Insolvency” below.
In addition, section 176A of the Insolvency Act provides that any liquidator (or administrator or receiver) of
a company is required to make a “prescribed part” of the company’s “net property” available for the satisfaction
of unsecured debts in priority to the claims of the floating charge holder. The company’s “net property” is
defined as the amount of the chargor’s property which would be available for satisfaction of debts due to the
holder(s) of any debentures secured by a floating charge and so refers to any floating charge realisations less any
amounts payable to the preferential creditors or in respect of the expenses of the liquidation (to the extent
deductible in priority to floating chargeholder claims) or administration. The “prescribed part” is defined in the
Insolvency Act 1986 (Prescribed Part) Order 2003 to be an amount equal to 50 per cent. of the first £10,000 of
floating charge realisations plus 20 per cent. of the floating charge realisations thereafter, provided that such
“prescribed part” may not exceed £600,000.
This obligation does not apply if the net property value is less than a prescribed minimum and the relevant
officeholder is of the view that the cost of making a distribution to unsecured creditors would be
disproportionate to the benefits. The relevant officeholder may also apply to court for an order that the
provisions of section 176A of the Insolvency Act should not apply on the basis that the cost of making a
distribution would be disproportionate to the benefits. With respect to situations where there is more than one
borrower, this amount can become material.
Bankruptcy
Bankruptcy is a proceeding relating to the insolvency of an individual. On the application of a creditor in
respect of a debt in excess of £750 that the debtor is apparently unable to pay, the court may make a bankruptcy
order. A debtor is considered to be unable to pay the debt or debts in question if a statutory demand has not
been met within three weeks, or if execution is returned unsatisfied in whole or in part.
A debtor may also be made bankrupt on his own petition. An order may be made if the debtor is unable to
pay his debts; this is not defined for the purposes of bankruptcy but is considered to mean that the debtor is
unable to pay debts as they fall due.
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