The Compendium

Making a Call

A contributory is someone who is liable to contribute to an insolvent estate at the time of Liquidation.

If a shareholder/member/owner has bought 100 shares valued at £1 each and paid £50 for them, he is liable to pay the remaining £50 towards their face value if that company enters into Liquidation, as a ‘contributory’.

A Liquidator will make a ‘call’ on uncalled capital at a time she is getting in company assets and maximising returns for creditors. A call on shares is when the directors send a ‘call notice’ to shareholders stipulating their requirement to pay the company a specified sum of money, which may be some or all of the unpaid amount, in respect of any shares they hold. The call notice will state the payment deadline (or ‘call payment date’).

[See ‘Liquidation’, ‘Shareholder’ and ‘Contributory’.]

Marshalling

Marshalling is where two or more creditors are owed money by the same debtor, and one creditor has more than one security, whereas the other has resort to only one.

This is also referred to as ‘marshalling of securities’. It is an equitable remedy to do justice between two or more creditors, each of which is owed a debt by the same debtor. Marshalling is available to a creditor (B) in the following circumstances:

• Another creditor (A) and B have both taken security over some of the debtor’s assets (Assets X).
• A has taken security over some of the debtor’s assets over which B has not taken security (Assets Y).
• A has enforced its security over Assets X but not over Assets Y.

In these circumstances, B is entitled to use Assets Y to repay any of the secured debts owed to it that cannot be repaid out of Assets X because of A’s actions.