There are a number of ways in which a company can be saved. This can involve Administration or a Corporate Voluntary Arrangement (CVA) or just as easily an informal approach to creditors.
The choice depends on a number of factors. Whereas a CVA leaves control with the directors, an Administration takes control away but might result in a solvent company that can be handed back to the directors. It is important to take professional advice early. At Gore and Company it costs nothing and could save a lot of worry. See our pages on CVAs and Administrations.
Keeping Control During Insolvency
Most insolvency procedures result in control over the company passing to an Insolvency Practitioner. A Corporate Voluntary Arrangement (CVA) leaves control with the directors and gives them wide flexibility in the type of proposal that they make to creditors and over what period of time. If a case can be made that the CVA proposal is the best outcome to creditors, the company could freeze its liabilities at that date and start trading again within a matter of months. See further information on CVAs.
Closing a Company Down
It is sometimes clear that a company must be closed down because it is insolvent and unable to continue to trade. Discussions with an Insolvency Practitioner can mean that the worry is lifted from the shoulders of the directors and a professional is put in charge of closing the company down through a liquidation process. The directors then need to know what their obligations are, if there is any costs to them and what, if any, claims could arise against them. Gore and Company makes the process simple and straightforward and aims to answer these important questions. See our information on Liquidations.
A Members Voluntary Liquidation (MVL) is appropriate when the company is solvent and can pay all of its debts. It is therefore sometimes also appropriate when shareholders wish to extract capital from a family company or simply to close down a company and extract other assets from it.It is important to ensure that proper taxation advice is taken before using the MVL route to extract capital or assets. The members must pass a resolution to wind up the company and will then appoint a liquidator. Notice of the resolution to wind up must also be published in the London Gazette.
It is used to be the case that a bank would usually appoint a receiver, called an Administrative Receiver, to a company. This has now largely been replaced by the Administrator and administrative receiverships are now rare.
Creditors and their rights
UK insolvency legislation gives a liquidator many powers to trace and identify assets belonging to a company. Creditors often suspect or have good evidence that valuable assets have been put beyond the reach of creditors by directors or others but do not know what steps they can take to make sure that they are recovered into a liquidation. Gore and Company works with a team of solicitors, leading insolvency counsel and private investigators to trace assets, find evidence and recover funds for the benefit of creditors. The team works on a contingency basis and will be paid, with the agreement of creditors, from the amounts realised.
Creditors themselves may have difficulty but a liquidator has wide ranging powers and can demand the production of the company’s books and records, require the directors to answer his questions and provide information on the company’s dealings and make enquiries of the company’s accountants and lawyers. If the director fails to answer the liquidator’s questions the liquidator can ask the court to compel him to do so. Once the liquidator has established what has happened he can require the director to make good the loss to creditors. See our information on Complex Insolvencies.
Wiping the slate clean
The government has tried to encourage a recovery culture in the UK to allow practitioners to save businesses whenever this is possible. The Administration and Corporate Voluntary Arrangement routes can both lead to a business being saved, free from its liabilities and able to continue to trade with a clean slate. Professional advice must be sought so that the right approach is taken and to make sure that the objectives of directors and shareholders are achieved and creditors rights protected. See our pages on CVAs and Administrations.