Corporate insolvency procedures
There are a number of insolvency procedures for businesses. Many factors contribute to deciding which procedure will be the most appropriate and an insolvency practitioner will be able to provide advice as to which one is the most suitable for the business and the financial position it is in.
The most critical step when a business is struggling is to Act Early and Seek Advice. The sooner guidance is sought, the more options there will be available, and the better the potential outcomes for the business, employees, and the directors. Delaying action can significantly limit the choices available and worsen the situation for all. Information relating to all insolvency proceedings, for both corporate and personal insolvency, can be found on ‘The insolvency framework’ page.
Administration
Administration is intended to support business rescue. The process is overseen by a licenced insolvency practitioner acting as an Administrator. As with any insolvency procedure, the overarching aim is to act in the best interests of creditors. This may include selling the business either as a whole, or in part.
Pre-packs
A pre-pack is where the sale of a company’s business and/or assets is arranged before the start of an insolvency procedure then completed immediately or shortly after the procedure begins. Proceeds from the sale are used to repay the company’s creditors.
Liquidation
Liquidation is the process by which insolvent companies are closed down and debts repaid to creditors out of the available assets. This happens when there is no prospect of rescuing the company. Depending on the type of liquidation, the process is overseen by either a licensed insolvency practitioner (acting as a liquidator) or by the Official Receiver.
Company Voluntary Arrangements
A company voluntary arrangement (CVA) is a binding agreement between a company and its creditors, and is one of several statutory corporate insolvency procedures.
Receivership
There are several different forms of receivership, although just one is a statutory insolvency procedure which must be overseen by a licensed insolvency practitioner.
Scheme of Arrangement
A scheme of arrangement is a court-sanctioned agreement between a company and other parties. Schemes are a flexible and long-established Companies Act procedure. A scheme is a useful strategic device in a wide range of circumstances including restructurings, takeovers and mergers.