Insolvency Advice for Businesses

Where your company has become insolvent, you can apply for a Company Voluntary Arrangement (CVA) allowing you to pay your creditors over an agreed period. This can allow your company to continue trading, but only if 75% of your creditors by value agree to the CVA.

This process requires that an insolvency practitioner is appointed. Once commenced, a compromise or other arrangement with creditors is implemented under the supervision of the appointed insolvency practitioner (as the nominee before the proposals are implemented, who then becomes known as the supervisor).

If the relevant majority of creditors vote in favour of the proposals at properly convened meetings of creditors and shareholders of the company, the proposals are binding on the creditors and the company. However, the arrangement does not affect the rights of secured or preferential creditors (those creditors whose claims rank in priority to other unsecured creditors and floating charge holders which include certain employee claims and contributions to pension schemes), unless they agree to the proposals.

The additional benefit for small companies is that they have the option to exercise a moratorium before any CVA is put into place.

We can assist with:

• Advice on the suitability of a CVA for your business
• Negotiating the terms of a CVA with the insolvency practitioner, company stakeholders & creditors
• Ensuring the CVA complies with your corporate governance obligations
• Advice on alternatives to CVAs, such as pre-package sales

Internal re-organisation of a business and/or corporate structure can allow you to modify your company’s capital structure and/or operations to make the business more efficient or commercially viable.

Some forms of restructuring include:

• Reduction or division of share capital of a company
• Re-arrangement of companies within a group of companies
• De-merger of a business

Companies restructure for a number of reasons which include tax efficiency, increased commercial efficiency or the purchase of a company that is facing financial problems and/or is likely to become insolvent.

Our Corporate team can assist with all aspects of corporate restructuring, including:

• Advice on different corporate structures and their advantages
• Any potential pitfalls of restructuring and how to mitigate these
• Preparing the necessary legal documentation for your restructure
• Updating records with Companies House, finance providers & other relevant parties
• Ensuring compliance with all relevant laws and regulations

Find out more about how we help businesses with corporate restructuring & demergers.

A company may be put into administration by a court order sometimes following an application by the creditors, or an out of court procedure available to the company, its directors, or the holder of a qualifying floating charge. The aim of an administration is to achieve a better result than a liquidation, ideally to save a business where possible or, where the company cannot be saved, for it and/or its assets to sold to meet the business’s debt obligations.

Once a company is put into administration, an administrator is appointed who then conducts the affairs of the company and takes over its management. At the point that the company enters into administration, it has the protection of a moratorium which prohibits creditors from instigating or continuing with a legal process against the company without the consent of the administrator or the permission of the Court.

Our Corporate Restructuring & Insolvency team can assist companies entering administration with matters including:

• Appointing administrators
• Pre & post sale restructuring
• Asset sales
• Defending claims against directors

Often referred to as ‘winding up’, this is an insolvency procedure under which the assets of a company are realised and distributed to creditors by the appointed liquidator as prescribed by legislation. Liquidation can be compulsory or voluntary.

Compulsory liquidation is instigated by a creditor and following a Court order, the liquidation commences. Following the introduction of the Corporate Insolvency & Governance Act 2020, this is more difficult as the Court will not order a compulsory liquidation where it is a consequence of Coronavirus.  This will last until September 2020 and may be extended.

A voluntary liquidation is instigated voluntarily by the directors of the company.  A members’ voluntary liquidation can be used as a tax efficient method of distributing a solvent company’s assets to its members.  Unlike the administration procedure, liquidation always results in the dissolution of the company.

Our Corporate team can assist with matters including:

• Defending statutory demands/winding up petitions
• Applying for a Validation Order to allow your business to continue trading
• Defending Directors against claims from office holders
• Issuing statutory demands/winding up petitions
• Advising on voluntary liquidations solvent or insolvent

If you are selling all of part of your business in response to an insolvency situation, it is important to tread carefully to ensure you meet your legal obligations. You must act in a way that protects the interests of your creditors and ensure you receive a fair value for the business or its assets.  It is imperative that you seek professional advice in this situation and we would usually work with licensed insolvency practitioners to protect directors and members’ interests.

Where a company has entered administration, it will be the administrator’s decision and responsibility to sell the business or its assets. Should a company go into liquidation, the business can no longer be sold as a single entity and only its assets can be sold.

Where an insolvent business or its assets need to be sold, our team often act for insolvency practitioners or buyers to help you through this process.

Find out more about how we can assist with business sales.