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In relation to corporate insolvency, a) i) Explain what is meant by a contributory. ii) Distinguish between fraudulent and wrongful trading. Against whom...

      

In relation to corporate insolvency
a)
i) Explain what is meant by a contributory.

ii) Distinguish between fraudulent and wrongful trading. Against whom may proceedings by brought for breaches of provisions against fraudulent trading and wrongful trading?

b) Highlight the powers of the court on hearing a petition.

  

Answers


Martin
i) Under Section 214 of the Companies Act 'contributory' means 'every person liable to contribute to the assets of a company in the event of its being wound up.'
-The liability of a contributory creates a debt from him to the company.
- These are persons who owe the company in respect of shares held.
- A contributory may be a present or past member of the company.

ii) Under Section 323 (1) (a) of the Act, if in the course of winding up a company, it appears that any business of the company has been carried on,
- With intent to defraud its creditors or creditors of any other person or For any fraudulent purpose.

the court may, on application of the official receiver or liquidator or creditor or contributory of the company, declare that any person who was knowingly party to the carrying on of the company's business as such personally responsible without any limitation of liability, for any debts or other liabilities of the company as the curt may direct.
-All persons who are knowingly parties to the carrying on of the company's business are liable to an imprisonment for a term not exceeding 2 years or a fine not exceeding Kshs.10,000 or both.
- If the person(s) is a creditor to the company, the court may order that he ranks behind all other creditors in the satisfaction of claims.
- If the person(s) is a creditor to the company, his claim against the company is offset against the amount due from him to the liquidator.

b) Under Section 222 of the Companies Act, on hearing a winding up petition the court may: Dismiss it.
- Adjourn the hearing conditionally or unconditionally.
- Make an interim order.
- Make such other or further order as it may deem fit.
- However, the court cannot refuse to make a winding up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets or that the company has no assets.




marto answered the question on February 6, 2019 at 08:09


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