Corporate Insolvency
Financial or operational difficulties are a common occurrence for businesses during their lifespan. While some may face minor setbacks, such as delayed payments from creditors, others may encounter more severe issues that can push the company towards insolvency.
Our experienced team of Restructuring and Insolvency professionals will work alongside you to advise on a range of corporate insolvency processes, depending on your financial position.
Our Corporate Insolvency Services
Administration
Administration is a formal insolvency procedure designed to protect financially distressed companies while plans are formed to rescue the company, to sell the business and assets to produce a better result for creditors than a liquidation or distribute assets to a secured or preferential creditor.
It is often used as an alternative to a Creditors’ Voluntary Liquidation and is a powerful process for gaining control and placing a moratorium around the company, to stop legal actions whilst the proposals are formulated.
An Administration can be a very flexible rescue tool which can allow for the business to continue trading whilst various restructuring options are explored, with a view to, where possible, preserving jobs, maximising creditor returns, and ensuring the company’s ongoing viability
Company Voluntary Arrangement
A Company Voluntary Arrangement (CVA) is a formal legal agreement which allows a financially distressed company to reach a compromise or arrangement with its creditors regarding the repayment of debts. This arrangement, typically running between 3 – 5 years, is overseen by a licensed insolvency practitioner and requires approval from a significant majority of the company’s creditors.
If the CVA is approved, the company may be able to continue trading as usual, using its earnings to pay existing creditors an agreed proportion of their debts and enabling some value to be maintained by the shareholders and control to be maintained by the Directors.
Compulsory Liquidation
A Compulsory Liquidation is initiated by a creditor by presenting a petition for a winding-up order, which will be granted if the Court is satisfied that the company is unable to pay its debts and is considered insolvent. The creditor may be able to establish insolvency by first issuing a statutory demand against the Company should this fail to be paid, or a compromise reached within 21 days. This is often the last resort of a creditor to get paid.
Once the winding-up order is made, the matter is first referred to the Official Receiver. The Official Receiver may remain in office as Liquidator or seek the appointment of a licensed insolvency practitioner to act as Liquidator in their stead. The Liquidator once appointed will oversee the process of identifying and realising the Company’s assets, agreeing claims from creditors and distributing funds.
Creditors’ Voluntary Liquidation
A Creditors’ Voluntary Liquidation (CVL) is a formal insolvency procedure which is initiated by the directors of an insolvent company, where the shareholders pass resolutions for the winding up of the Company and appointing a licensed insolvency practitioner as Liquidator. It is then for the creditors to either approve that appointment or seek to appoint an alternative Liquidator.
Amongst other things, the role of the Liquidator will be to realise the asset of the Company, investigate the reasons for the Company’s failure and any potential claims the Company or Liquidator may have arising from this. Additionally, where funds permit, the Liquidator will agree the claims of creditors and make a distribution of funds to creditors.
Receivership
A Receivership is a legal process that can be initiated when a company is unable to meet its financial commitments to a secured lender. This involves a secured lender, such as a bank, appointing a Receiver to take control of, manage, and sell the assets covered by the security on behalf of the secured creditor. To find out more about Receiverships, click here.
Why Choose Menzies?
Our Restructuring and Insolvency team are here to offer hands-on support and advice to help you proactively manage your situation. If you are facing financial difficulty, we can provide an expert assessment of your company’s financial situation – but early engagement is key. The earlier you seek advice, the more options available to your business and the best chance of its survival.
