The solutions
As
soon as you think there is a problem
seek advice from a qualified business recovery specialist. If your business is
insolvent then there are
a number of alternatives to consider:
- Trade sale
- Company Voluntary Arrangements (CVAs)
- Administration
- Liquidation
Trade sale
A customer, supplier or competitor may be interested in buying the business and injecting new capital to revive its fortunes.
However the scope for this solution is limited if the company is insolvent since this will mean that the sale will have to happen quickly.
Interested parties will often wait for a formal insolvency since the business can be purchased free of its creditors.
Company Voluntary Arrangements (CVA)
These are flexible legal contracts that allow a business to continue to trade and pay off a proportion of its debt over a period of time (usually 3-5 years).
The agreement only requires 75% of those crediotrs (in value) that choose to vote, to agree to the proposal. Once agreed all creditors are bound by the agreement and can take no further action to recover their debts.
A CVA must be managed by a qualified Insolvency Practitioner known as a Nominee before the contract is agreed and a Supervisor after the proposal is implemented.
Once successfully completed the company is free of its debts and any remaining debt is legally written off.
We are experienced in drafting and managing such agreements so contact us for more information about this solution or visit www.voluntaryarrangements.org.uk/cva.php
Administration
This is a procedure overseen by the Court and gives a company breathing space to re-organise its affairs or sell the assets to another party. Whilst an Adminsitration Order is in force no creditor can take action against the company to recover the debt.
The Adminstrator must be a qualified Insolvency Practitioner and effectively takes over control of the company (unlike a CVA where management remain in control).
More often than not the business is sold free of its debts and the funds are used to pay off the company's debts (usually only a small proportion of the debt).
Administration is used to rescue viable businesses and can be a flexible and efficient tool to achieve this. We have extensive experience of Administrations and are qualified to act as Administrators (who are officers of the court). Contact us for more information about this solution.
Liquidation
This is the last resort for a company as it usually results in closure. It is possible for the business to be sold and continue to trade but this would normally be done through the Administration or CVA process rather than liquidation.
There are 3 main types of liquidation:
- Compulsory liquidation – normally commenced by a creditor due to non payment of debt. This is a court process where a winding up petition is presented and a judge decides whether to place the company into liquidation. The Official Receiver becomes liquidator, however an Insolvency Practitioner may be appointed at a subsequent meeting of creditors.
- Creditors’ Voluntary Liquidation (CVL) – when a company is insolvent the directors may commence the winding up (liquidation) process. The shareholders must resolve to place the company into liquidation and a meeting of creditors is then held. The liquidator, who must be a Licensed Insolvency Practitioner, is initially chosen by the shareholders and ratified (or otherwise) by the creditors.
- Members’ Voluntary Liquidation (MVL) – this is where the business is solvent but its affairs need to be finalised. It is an alternative to dissolving the company.