From negotiating with suppliers and creditors and turning around a failing business to formal insolvency solutions, we will help you understand all the options available to you.
Remember, the earlier you seek advice the more options there are likely to be. Don’t delay – contact us to find out how we can support your business.
Discover how we can help:
- The administration process can be commenced by directors, shareholders or creditors, by making an application to court. In many circumstances this is a “paper exercise” which means that the appointment can be brought into effect quickly.
- An administration can be used as a tool to enable the restructuring or sale of a business, to allow it to continue trading.
- To enable trading to continue whilst the correct decision is made about the company’s future, a moratorium is granted to the company which prevents creditors taking or continuing with legal action against the company without the permission of the court or of the Administrator.
- Where trading is not possible, a sale can be brokered prior to administration with the sale agreement being signed almost as soon as the appointment takes place. This is known as a pre-pack administration.
- CVA is an agreement between an insolvent company and its creditors to repay or reschedule its debts and can be hugely effective where a company has found itself in financial difficulty due to a one-off issue (a large bad debt for example) or has successfully turned itself around but is struggling to deal with its historic debts.
- Whilst repayment of debts in full is not a requirement of a CVA, it is a consensual process and in order for it to be approved a company requires a majority of shareholders and 75% or more of voting creditors to vote in favour of the proposals put forward.
- One of the advantages of using a CVA is that the current directors retain control of the company throughout the process. If successfully completed the company will be able to continue to trade following the end of the process without the additional costs and loss of goodwill that may arise following the appointment of an insolvency practitioner to run the business.
- To enter MVL a company must be able to pay all of its debts in full, together with statutory interest. Once all of the debts of the company have been paid the residual assets can be distributed to the shareholders.
- There are a number of reasons why a MVL procedure might be appropriate:
- Retirement – you want to close a company and extract the value tax efficiently.
- You have sold the business and assets of the company and are left with cash that needs to be extracted in a tax efficient manner.
- You want to split a business into two separate companies
- The limited company has come to the end of its useful life and is no longer required but has assets remaining within it.
- Group rationalisation – you may have companies in your group which are no longer providing value but do have associated costs and need to be closed down
- A CVL is a process instigated by the director(s) of the company and can, therefore, be commenced at any time once the directors identify that the company is insolvent. Whilst instigated by the director(s), it is the shareholders that take the decision to place the company into CVL.
- The benefit of a director initiating this process is that it can be achieved in a more controlled fashion than a Compulsory Liquidation, which typically improves realisations, helps employees, and evidences that the director is taking positive steps to deal with the situation and avoiding making matters worse for creditors.
- This is a court led process and can be instigated by one of any number of stakeholders of a company.
- The process is often started by a single creditor of a company that is owed more than £750 issuing a statutory demand. If this demand remains unpaid and unchallenged for three weeks, then they could start a compulsory liquidation process by issuing a petition.
- If you have received a statutory demand you should seek advice immediately as the longer it is left, the fewer options will be available to you to deal with the situation.
- A process available to companies and limited liability partnerships (LLPs) facing financial difficulties that are, or likely to become, unable to pay their debts, in circumstances where it is considered likely that a statutory breathing space would enable the rescue of the company/LLP as a going concern.
- This process leaves the running of the business to the current management, known as “debtor in possession”, but requires the appointment of a licensed insolvency practitioner to act as Monitor of the process to provide oversight and safeguards for creditors.
- The effect of the moratorium is to create a payment holiday from some pre-moratorium debts, prevent insolvency proceedings being commenced, unless by the directors or on the grounds of public interest, and to stop creditors from taking steps to forfeit, repossess goods, enforce security or continue most legal processes without the court’s permission.
- This is not an Insolvency Act process but is instead governed by the Companies Act 2006.
- A Restructuring Plan can only be used in circumstances where the company is, or will become, unable to continue trading as a going concern. Given the likely pressure faced from creditors the development of such a plan might be used in conjunction with a Moratorium.
- The process enables a company to propose a compromise with its creditors and/or members, or any class of them, and will have the ability to bind secured as well as unsecured creditors.
- Creditors are divided into classes, which are reviewed by the court, and each class will vote on the plan proposed. A class approves the plan if 75% of creditors in value, in attendance, vote in favour.
- Final approval must be given by the court and this could be in an instance where another class of creditor has voted against (known as cross-class cram down), if the court determines that the plan is just and equitable and provided those creditors are no worse off than in an alternative scenario.
- If you are a director of a limited company facing financial uncertainty there are a number of pitfalls you need to ensure you avoid. Often, whilst taking certain actions may seem like the right thing to do it can cause problems both for you and other parties involved.
- As a director in this period you are required to act in the best interests of creditors and to ensure that their position is not made worse.
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