Corporate Insolvency and Recovery
Where there is an underlying business, the whole or part of which is viable, a rescue procedure may be implemented. This is usually an Administration.
Administration
A company can be placed into Administration by an order of the Court or without a Court order by a qualifying floating chargeholder.
A licensed insolvency practitioner is appointed to manage the company's business and property.
The purpose of Administration is to either:
- rescue the company as a going concern
- achieve a better result for the company's creditors as a whole than would be likely if the company was wound up
- realise property in order to make a distribution to one or more secured or preferential creditors.
As is the case with most financial matters, the key to be being able to implement a successful rescue package is early advice when the warning signs appear.
However, in many instances there may be no business to save and a terminal procedure is the only option.
The options are:
Creditors Voluntary Liquidation
Compulsory Liquidation
Members Voluntary Liquidation
Creditors Voluntary Liquidation (CVL)
A CVL is an insolvent liquidation process which is driven initially by the directors giving greater control of the winding up.
Once the decision to liquidate is made by the shareholders, usually at the request of the directors, the creditors vote to either ratify the shareholders decision or appoint a liquidator of their choice.
Once you have appointed us, the burden you face in dealing with your creditors, landlord, employees and others is immediately lifted.
Despite this being a terminal procedure, often the best outcome for all shareholders is where the directors purchase the assets of the company and start up a new business. This is perfectly legitimate provided the relevant legislation and SIP 13 is complied with. We are happy to give advice in this respect.
Compulsory Liquidation
This is a similar procedure to a CVL but is initiated by an order of the Court, on the petition of a creditor, the company or a shareholder.
The problem for most directors is that the procedure immediately takes control away from the directors (usually at the point the petition is presented as the company's bank account will be frozen).
In the first instance the Official Receiver acts as liquidator although an insolvency practitioner will be appointed where there are significant assets to be realised.
Members Voluntary Liquidation
This is a solvent winding up procedure and is the proper way of dealing with a company that is ceasing to trade. Quite often this is as a result of tax planning or simply retirement or reorganisation by the members.
A liquidator is appointed to realise the company's assets which must be sufficient to settle all its debts within 12 months.
Any balance will then be distributed to shareholders enabling them to realise their interest in the company.
Please contact Alison Byrne for further information in respect of any of the above procedures.
“ In many instances there may be no business to be saved and a terminal procedure is the only option ”