Liquidation and Bankruptcy
15 October 2003, 06:17 AM
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Just wondering in some detail, about these.
1) If company B takes over company A (because company A is in financial trouble), can Co B *in ANY circumstances*, say it is not liable for the previous debts of co A ?
I thought any deal to acquire a company (or company name)means that all assets & liabilities are purchased, not selected assets & liabilities.
2) Any difference between a company being..
Bankrupt / In Liquidation / In Receivership / In Administration.
Presumably Bankrupt is a general term whereas the others imply a specific and distinct legal status ??
Ta.
1) If company B takes over company A (because company A is in financial trouble), can Co B *in ANY circumstances*, say it is not liable for the previous debts of co A ?
I thought any deal to acquire a company (or company name)means that all assets & liabilities are purchased, not selected assets & liabilities.
2) Any difference between a company being..
Bankrupt / In Liquidation / In Receivership / In Administration.
Presumably Bankrupt is a general term whereas the others imply a specific and distinct legal status ??
Ta.
15 October 2003, 09:50 AM
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Sorry, missed this one till now.
) If company B takes over company A (because company A is in financial trouble), can Co B *in ANY circumstances*, say it is not liable for the previous debts of co A ?
Yes, in fact it is very unusual for company B to assume liability for the debts of company A.
To legally acquire in full company A, company B would have to purchase the share capital in company A. Company A would then be a subsidiary of company B, but company B would not assume any liability for A's debt, nor however would it own the assets. In the event company A became formally insolvent, the value of that shareholding would be £nil.
Company B could, however, cherrypick what assets it wanted of company A (for "value"), and undergo a name swap and then wind up company A.
I thought any deal to acquire a company (or company name)means that all assets & liabilities are purchased, not selected assets & liabilities.
A company name can be "sold" by shareholder resolution or by company B aquiring the whole or substantially the whole of the assets of company A (but not its liabilities)
The only exception to that, is that due to the Transfer of Udertakings Protection of Employment Regulations employees contracts must (basically) be transferred to the company aquiring those assets
2) Any difference between a company being..
Bankrupt / In Liquidation / In Receivership / In Administration.
Presumably Bankrupt is a general term whereas the others imply a specific and distinct legal status ??
Not quite, Insolvent is the general term, Bankruptcy in the UK refers to non incorporated bodies (individuals, partnerships etc) and Liquidation, Recievership & Administration as you correctly state imply a distinct and legal status.
Hope this helps
) If company B takes over company A (because company A is in financial trouble), can Co B *in ANY circumstances*, say it is not liable for the previous debts of co A ?
Yes, in fact it is very unusual for company B to assume liability for the debts of company A.
To legally acquire in full company A, company B would have to purchase the share capital in company A. Company A would then be a subsidiary of company B, but company B would not assume any liability for A's debt, nor however would it own the assets. In the event company A became formally insolvent, the value of that shareholding would be £nil.
Company B could, however, cherrypick what assets it wanted of company A (for "value"), and undergo a name swap and then wind up company A.
I thought any deal to acquire a company (or company name)means that all assets & liabilities are purchased, not selected assets & liabilities.
A company name can be "sold" by shareholder resolution or by company B aquiring the whole or substantially the whole of the assets of company A (but not its liabilities)
The only exception to that, is that due to the Transfer of Udertakings Protection of Employment Regulations employees contracts must (basically) be transferred to the company aquiring those assets
2) Any difference between a company being..
Bankrupt / In Liquidation / In Receivership / In Administration.
Presumably Bankrupt is a general term whereas the others imply a specific and distinct legal status ??
Not quite, Insolvent is the general term, Bankruptcy in the UK refers to non incorporated bodies (individuals, partnerships etc) and Liquidation, Recievership & Administration as you correctly state imply a distinct and legal status.
Hope this helps
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