General rules on statute-barred debts, Business Law and Ethics

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General rules on statute-barred debts:

A statute-barred debt should be rejected since it is not legally enforceable.  But in a members' voluntary winding up the liquidator may with the consent of all contributories pay such a debt.  The general rules on statute-barred debts are:

(a) in a normal case a debt becomes statute-barred (i.e. the creditor may no longer take legal proceedings to enforce payment) if it remains unpaid for six years and the creditor does not within that time commence legal proceedings to recover it.

(b) the company becomes liable again to pay a statute-barred debt (after six years) if it issues to the creditor a written acknowledgement of its indebtedness.

The liquidator must also consider whether any debts of the company arise from contracts which are ultra vires or ultra vires the company but made by the directors without authority.  The liquidator must according to his judgement of the legal position either.

(a) reject the creditor's claim as invalid if that is possible, or

(b) consider claiming compensation from the directors who made the unauthorized contract on the grounds of their misfeasance under s.323.


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