At this challenging time, our team is on standby to help you

Whatever situation you face, it is good to have an understanding of what insolvency means and the range of options that may be available to you. Depending on your situation, the outcome isn't always as negative as you may imagine it to be. 

A company faces insolvency when its assets can no longer cover it's debts and other liabilities. Typically a company becomes insolvent through either being cash flow insolvent - running out of money in the bank and being unable to pay debts when they due; or balance sheet insolvent - when liabilities become greater than the assets.

How we can help

Wherever you are, whatever issue you face, the earlier you act the more options you have. We understand this is an incredibly worrying time and that’s why we’re here to help you through. The earlier you get in touch with an Insolvency Practitioner, the greater your range of options.

Don't let these worries keep you up at night, face them head on by speaking to an IP as soon as you can.

The first step is gaining an understanding of your options. Read on for an overview of the main insolvency processes and when they can apply.

Creditors’ Voluntary Liquidations and Court Liquidations

In some circumstances a company is no longer viable and will find itself under increasing pressure from creditors. Once the directors have formed the view that a company is unable to pay its debts as they fall due or is in an insolvent position that it cannot trade out of, they must take action. The first step in this is to take advice. If the decision is then taken that the company cannot be rescued it can be placed into Liquidation. This can be through a Creditors’ Voluntary Liquidation (CVL) or a Court Liquidation. Once a liquidator is appointed their role is to ingather the assets of the company to distribute to creditors according to their rankings.

Court liquidations also take place when a company is wound up compulsorily by an unpaid creditor.

While these can be difficult circumstances to deal with, acting quickly can lead to a better outcome for stakeholders. Our Restructuring and Insolvency team can assist with the process and advise on the best course of action. We have the technical expertise and experience to assist in dealing with the situation in a quick and uncomplicated manner.

Company director responsibilities

During times of financial strife, company directors have a responsibility to act in the best interests of the company. It's worth refamiliarising yourself with what your duties are, the warning signs to look out for and the action to take. Download our short Directors Responsibilities guide below.

Administrations

In some situations, an Administration appointment might be appropriate as it provides a company with useful protection from legal action by its creditors whilst a solution to the problem is found. The protection given by an administration is called a moratorium which effectively gives breathing space to reorganise the business to allow it to trade out of administration. Alternatively, the protection might allow a sale of the company’s business to be completed. In this way viable businesses can be saved.

In business there are some situations that become very difficult to deal with. Businesses in seemingly impossible situations should seek advice as early as possible. Doing so will give them more options about their next steps and allow them to make a more considered decision about how they move forward. We have expertise in advising directors in the lead up to an administration appointment in a clear and concise way and we have many years of experience in carrying out administrations to provide a better outcome than would have been achieved in a liquidation.

What is a moratorium?

A new Moratorium option for companies was introduced by The Corporate Insolvency and Governance Act 2020. It is designed to allow struggling companies time to explore rescue and restructuring options by removing the threat of creditor action. The directors remain in control of the company during the moratorium period. It is a court approved process and must be managed by a Licenced Insolvency Practitioner who has to certify that the company can be rescued as a going concern. The initial Moratorium period is 20 days but this can be extended for a further 20 days by the leave of the court. 

The Moratorium period provides the company with time to look at options such as  refinancing which would enable the rescue of the company. 

Restructuring Plan

The Corporate Insolvency and Governance Act 2020 also introduced a new Restructuring Plan which is designed to be a flexible procedure which can stand alone or used alongside the moratorium to bind both secured and unsecured creditors. It is a court approved and supervised procedure and can be proposed by the company, creditors or shareholders if the company has encountered difficulties which may affect its ability to carry on business as a going concern. It will contain some form of compromise or arrangement to deal with the company’s financial difficulties. The plan also has the capability to “cram down” dissenting creditors which limits the ability of ransom creditors to block an otherwise approved plan.   

Taking advice quickly when the company experiences financial difficulties could enable the restructuring plan to be a viable option with the intention of saving the company.  Our Restructuring and Insolvency team can assist with the process and advise on the best course of action. 

Company Voluntary Arrangements (CVAs)

A Company Voluntary Arrangement (CVA) is a legally binding agreement between a company and its creditors to repay those creditors, either in part, or in full, over time. CVAs are typically used where there is profitable business activity within a company which has become overburdened by historic debt, such as PAYE, VAT, rent or rates arrears. During a CVA the directors remain in charge, but a supervisor is appointed to oversee the rescue plan. CVA procedures are increasingly used to help restructure businesses which have a viable future and they can be a useful way of allowing the legal entity to survive, thereby preserving the interests of the shareholders.

Our Restructuring and Insolvency team has the knowledge and expertise to devise an acceptable and viable CVA proposal. Getting advice on CVAs at an early stage is vital as it can secure the survival of a company before the financial position worsens to such an extent that a CVA can no longer be considered.

Let’s get started

We're here to help. If you're ready talk now, get in touch with me directly by email at Matt.Henderson@jcca.co.uk to arrange an initial chat. We'll then get started on a plan that's right for you.



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