Companies

Directors of companies in difficulty must proceed carefully.

Professional advice should be obtained for specific situations. If there is a real prospect of failure directors should not act in any way that materially worsens the position of creditors. The Insolvency Act has provisions for misconduct, improper transactions and individuals can be disqualified from acting as a director.

Restructuring
Many businesses that fail could have been saved if specialist advice had been sought in time. A typical rescue through a restructure will include understanding the immediate financial position, managing urgent issues, talking to key stakeholders, understanding the business, assessing viability, preparing a recovery plan and implementing it.

Company Voluntary Arrangement
A “CVA” is a structured procedure for viable but debt ridden companies where directors stay in control. A Proposal is made to creditors for the delayed/reduced payment of debt. If accepted by 75% of creditors who vote it binds all creditors.

Administration
An Administrator takes charge with powers to remove directors, manage the business, cease trading and sell the business and assets. Proposals are made that may include a rescue or a wind down. An Administration “Phoenix” or “Pre-pack” involves the directors or a third party buying a business shortly after insolvency to continue the business.

Receivership
The holder of a qualifying floating charge can appoint an administrative receiver with powers to manage and sell the business. A fixed charge receiver realises a specific asset.

Liquidation
A liquidator realises assets and distributes funds. For insolvent companies the procedure is a Creditor's Voluntary Liquidation, initiated by directors, or a Compulsory Liquidation, initiated by a petition to Court, usually by a creditor. A Liquidation “Phoenix” involves the directors buying assets to continue in business.

A Members Voluntary Liquidation is for the closure or restructure of a business. Creditors are paid in full.

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