Corporate Insolvency Procedures

As leading insolvency practitioners, we offer a full range of insolvency and corporate recovery services, providing specialist services to a number of banking clients, factors and other lenders, including viability and security reviews, restructuring and new business opportunities, and corporate insolvency procedures. We have developed a range of insights for businesses which can be found here.

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Administration

Administration is a corporate recovery procedure designed to protect companies from their creditors while a restructuring plan is developed. It can stop different kinds of creditor action, including:

  • Bailiffs seizing on behalf of rating authorities
  • Landlord distraint for rent arrears
  • Action by HMRC to enforce debt

Following changes to legislation in September 2003, the administration procedure is now streamlined, resulting in reduced costs and better returns to creditors.

An administrator can be appointed by filing documents at court on the instruction of the directors, a qualifying charge holder, the shareholders or by a creditor.

With a few exceptions, the administration must be concluded within a year.

Administration must:

  • Rescue the company as a going concern; or
  • Achieve a better realisation of the company’s assets than a liquidation.

If neither of these are possible, the administrator can use property to make a payment to the company’s creditors.

If the deal is done immediately before or after an administrator is appointed, this is known as a pre-pack administration or pre-pack. Find out more about pre-packs here.

Administrative receivership

Administrative receivership is a procedure that can only be instigated by a secured creditor with a valid floating charge over the assets of the company —usually the company’s bank. An administrative receiver’s role is to achieve the best outcome for the appointing charge holder.

The charge must have been created prior to 15 September 2003. With a few exceptions, secured creditors with charges created after that date are no longer able to appoint an administrative receiver. Administration is viewed as an alternative action.

Liquidation

Should it be necessary to close your business, you will need to go through a formal liquidation process. This will ensure all your company’s affairs are dealt with properly, with the end result that the company is dissolved and ceases to exist.

Depending on the financial position of your business at the time, there are three options:

  • Creditors’ voluntary liquidation
  • Compulsory liquidation
  • Members’ voluntary liquidation

To find out more about liquidation, please see our Liquidation Toolkits:

Fixed charge receivership

A fixed charge receivership is an efficient way for lenders to take control of single or multiple assets. It is usually a more simple and cost-effective process than administration and requires a fixed charge receiver to collect the asset.

A fixed charge receiver may be appointed by a lender with a mortgage, charge or other security over real property or other specified assets. The appointment is quick and inexpensive.

The receiver will generally have broad powers to realise assets and, in respect of real property, collect rent. Unlike many other insolvency appointments, a fixed charge receiver need not be a licensed insolvency practitioner and specialist surveyors can be appointed.

Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement (CVA) is legislation that enables a company to make a private arrangement with all its unsecured creditors. It allows a business to reach a company debt compromise with the organisation it owes.

The company could:

  • Freeze the company’s debt and any interest charges
  • Repay the debt in affordable monthly instalments
  • Prevent creditors from taking further action against your company
  • Write off a proportion of the company’s debts with creditors’ consent

A CVA can be tailored to suit the company’s and creditors’ needs. It could involve a five-year payment plan or a full and final settlement in the form of a lump sum to creditors, or a combination of the two.

A CVA avoids the need for liquidation, can save jobs and investments. Unlike liquidation, the supervisor is not required to investigate the directors’ conduct or submit reports to the DTI. However, if the directors’ conduct has been severely lacking, the supervisor must inform creditors, which could affect their desire to support the CVA.