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. We have developed a range of insights for businesses which can be found here.
Administration is a corporate recovery procedure designed to protect companies from their creditors while a restructuring plan is developed. The type of creditor action that administration will stop includes:
- bailiffs distraining on behalf of rating authorities
- landlords distraint for arrears of rent
- action by Revenue and Customs & Excise to enforce their debt
Following changes to legislation introduced in September 2003, the administration procedure is now streamlined which has resulted 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.
The purpose of the administration must achieve the:
- rescue of the company as a going concern or if that is not possible; or
- achieving a better realisation of the company’s assets than in a liquidation.
Only if the neither of the first two purpose are possible, can the administrator use the third purpose:
- realising property in order to make a payment to the company’s secured or preferential 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. To find out more about pre-packs, please see our pre-pack page.
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. This is usually the company’s bank.
The charge must have been created prior to 15 September 2003. With a few exceptions, secured creditors with charges created after 15 September 2003 are no longer able to appoint an Administrative Receiver. Administration is viewed as an alternative action.
An Administrative Receiver’s role is to achieve the best outcome for the appointing chargeholder.
Should it be necessary to close down your business, you will need to go through a formal liquidation process. This will ensure all your company’s affairs are dealt with properly, the end result being 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; or
- Members’ voluntary liquidation.
To find out more about liquidations, 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 fairly 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 CVA can seem complex, but they are really quite straightforward. There is legislation that enables a company to make a private arrangement with all its unsecured creditors.
The CVA procedure is simply a formal mechanism that permits a business to reach a company debt compromise with the organisation it owes. This means companies with debt problems can negotiate and reach a compromise with its creditors on the repayment of its debt.
Imagine if your 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
- The 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.
The CVA avoids the need for liquidation, can save jobs and investments. The Supervisor is not required to investigate the directors’ conduct nor submit reports to the DTI as in liquidation. However, if the directors’ conduct has been severely lacking, the Supervisor must advise creditors of this and this could affect creditors desire to support the CVA.