QUESTION FIVE

Nelson Plumbing Ltd (NEL) is an unsecured creditor of Richmond Lumber Ltd (RLL). NEL is owed $100,000 by RLL, and this amount has been outstanding for 18 months. NEL has contacted RLL on numerous occasions without satisfaction, and has also discovered that other suppliers of goods and services report that RLL has not been paying its debts.

Required:

a) Explain to NEL why it cannot appoint a receiver of RLL.

b) Explain to NEL the grounds upon which it can apply to the Court for a liquidator to be appointed for RLL.

c) Assuming NEL is successful and the Court appoints a liquidator, explain to NEL how a liquidator decides the order of priority for payment of the various claims or debts against RLL and where RLL's debt will fall in that order, referring to the relevant provisions of the Companies Act 1993 in your answer.