Our Services - Company Insolvency
We advise on and take appointments in Members Voluntary Liquidations (MVL's) (Solvent companies), Creditors Voluntary Liquidations (CVL's)(Insolvent companies), Company Voluntary Arrangements (CVA's), Company Administrations (Administrations), Administrative Receiverships) (AR's), Compulsory Winding Ups (CWUP's), Fixed Charge and LPA Receiverships.
Company Administration (Administration)
Where a company is insolvent but a rescue of the whole company or its business is possible, an Administration may be appropriate. This is a particularly relevant procedure where creditor pressure is acute and moratorium protection is required quickly to protect a going concern. In the past, Administrations were reserved for the largest businesses where there were sufficient assets and funds to finance a substantial report and application to the court. Legal changes have now enabled small businesses to enter Administration through an out of court procedure.
An Administrator is a Licensed Insolvency Practitioner appointed either by the directors of the company, the company itself, a floating charge holder (usually a Bank) or by the Court on application. In general terms an Administration protects the company and its business from its creditors whilst its business is sold or proposals regarding its future are prepared. Where appropriate and with professional advice, the sale of a business can be completed very quickly utilising pre-package procedures. The Administration deals with all classes of creditors.
Compulsory Winding Up (CWU)
Where there are insufficient or no asset to meet liabilities, and a rescue of a company/LLP is not possible, a CWU (also known as a compulsory liquidation) may be the only solution. CWU's may be commenced on the petition of a director of the company or a creditor if a debt remains unpaid after demand has been formally made. A petition to the court to compulsorily wind up a company has to be carefully drafted by a lawyer and we would direct you to a suitable specialist lawyer if this form of insolvency is appropriate.
The Insolvency Service website
https://www.gov.uk/government/collections/insolvency-service-guidance-publications
Administrative Receiverships (AR)
Where a company is insolvent and where there is a secured creditor holding a debenture that was created and registered prior to 15 September 2003, an Administrative Receiver may be appointed by the secured creditor. An Administrative Receiver is a Licensed Insolvency Practitioner appointed by the lender to realize fixed and floating charge assets for the debenture holder. The Administrative Receiver is obliged to deal with the claims of secured and preferential creditors and employees but has no power to deal with the claims of unsecured creditors other than to note them for a liquidator if one is subsequently appointed. An Administrative Receiver has full powers under the Insolvency Act 1986 to trade a business and do all that is required. His principal duty is to the debenture holder.
For further Information: www.hmrc.gov.uk/manuals/insmanual/ins1203.htm
Fixed charge and LPA Receivers
Fixed charge documents usually enable a lender and holder of fixed charge security over a property to appoint a fixed charge or an LPA Receiver over that property and to take possession and dispose of it in order to settle or part settle the lenders debt. Property usually refers to freehold or leasehold land or buildings but can also include accounts receivable (sales ledgers) and fixed plant and machinery. A creditor holding a fixed charge may appoint a receiver with certain limited statutory powers under the Law of Property Act 1925, s101(1). In practice the fixed charge will be drafted much more widely to include for example powers to manage the company's/an individual's business from the freehold premises subject to the charge and to sell the property. Insolvency Practitioners at Richard J Smith & Co are qualified to act as Fixed/LPA Receivers. For further information please see:
www.hmrc.gov.uk/manuals/insmanual/INS1209.htm
https://www.gov.uk/government/collections/insolvency-service-guidance-publications
Members Voluntary Liquidation (MVL)
An MVL is a statutory process enabling the tax efficient distribution of assets/reserves of a solvent company or Limited Liability Partnership (LLP) to its members under professional control . This is usually because trading has ceased and the company is no longer required and/or the directors propose to retire. It is tax efficient because distributions in a liquidation are taxed at a lower rate as compared to dividends drawn from a company. An MVL may also be appropriate where the aggregate of share capital, share premium account and any other non-distributable reserves exceeds £25,000.
Creditors Voluntary Liquidation (CVL)
Where there are insufficient assets to meet all liabilities and a rescue of a company is not possible a CVL may be the best solution. Following shareholders’ and creditors’ meetings a liquidator, who must be a Licensed Insolvency Practitioner, is appointed to realise all the assets and, after costs pay creditors in the order set out in legislation. The residual debts are written off and the company is dissolved.
Trading is swiftly brought to a close taking the pressure off directors. The Insolvency Practitioner advises the Directors from instruction to liquidation. Creditors' claims are dealt with by the liquidation process. Employees are made redundant and claims are dealt with under the Employment Rights Act by the Redundancy Payments Fund. Assets are dealt with by the liquidator and sold. The liquidator becomes responsible for all affairs to the closure of the liquidation.
Company Voluntary Arrangement (CVA)
Where a company is worth saving because it has a core profitable business that may be continued, or because the value of its business and assets need protecting while they are sold, then a CVA may be a suitable process. Trading may continue under the control of the directors with minimum disruption thereby preserving the goodwill of the business. Unsecured creditors claims are frozen at the date of the CVA.
The process involves the preparation of a proposal setting out the terms of the arrangement including a background and history, financial information, a Statement of Affairs and an Estimated Outcome Statement. The proposal will clearly set out the terms of continued trading together with proposed funding and the anticipated outcome for creditors. At an early stage in the process a Licensed Insolvency Practitioner is appointed by the directors of the company as the Nominee.
Unsecured creditors may accept, modify or reject the arrangement and the proposal will be accepted and binding on all creditors if 75% or more by value of unsecured creditors who vote are in favour.