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Archive for April 24, 2019

Insolvency Procedures

We act for insolvency practitioners, lenders and business owners on all aspects of corporate restructuring and insolvency.

Our client base includes a number of North West based and nationally based insolvency practitioners, most of whom we have advised for many years. They welcome our practical and commercial advice and our responsiveness. We advise them on the full range of insolvency processes.

Where commercial lenders have clients who are struggling to pay their debts, or are involved in an insolvency process, we assist the lenders in recovering their funds.

When businesses are having financial difficulties, we are able to advise the owners on the best solutions for their situation, whether that be a formal process such as administration, or an informal restructuring, a managed turnaround and refinance or just general commercial and practical advice.

We also regularly advise purchasers who are buying distressed businesses that may or may not be in an informal insolvency process.

There are a range of procedures available to struggling businesses including:

  • Informal arrangements with creditors
  • Company Voluntary Arrangements
  • Administration
  • Liquidation
  • Receivership

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Insolvency – Administration

Insolvency is defined in the Insolvency Act 1986, but broadly it means when a company does not have sufficient assets to discharge its liabilities as they fall due.

If this occurs, there are options open to the company owners and other stakeholders, one of which is administration. Administration is an insolvency process where an insolvent company is placed under the control of an insolvency practitioner (IP) to enable the IP to achieve objectives laid down in legislation.

How does a company enter administration?

There are two ways for a company to enter administration:

  • By court order – an application for a court order can be made by creditors i.e. those owed money by the company, the company itself, its directors, a liquidator, a supervisor of a CVA or pursuant to legislation.
  • By an out of court process by lodging certain documents with the court – this process is only available to the company or its directors or a party with a qualifying floating charge (usually a bank or commercial lender).

Why would a company or its directors put it into administration?

From the date that an application is made to court or a notice of intention to appoint administrators is filed, a moratorium in respect of claims will apply to protect the company against actions from creditors. In general terms this means that creditors will not be able to issue proceedings, HMRC will not be able to distrain or issue a winding up petition against the company and the landlord will not be able to forfeit its lease. If the company is concerned that creditors may issue proceedings then administration can provide some short term protection, allowing the company to restructure.

Often companies that enter administration end up being sold or at least their businesses and assets do. Sometimes a sale is agreed prior to the company going into administration and it may be a term of completing the sale that the company is put into administration first. Such sales are known as pre-packs. Pre-packs can be a relatively quick and smooth way to continue the business with as little disruption as possible.

What are the objectives of the administration?

The first objective of an administrator is to rescue the company so it can carry on as a going concern.

If this isn’t possible then the aim is to achieve a better result for the company’s creditors than would be likely if the company was put into liquidation. If such a better result cannot be achieved, then the objective is to realise the property of the company and distribute the proceeds to the company’s secured and preferential creditors in the first instance.

Next steps

 

If your company is experiencing financial difficulties and you are considering administration please get in touch. We can provide initial advice about your restructuring options and introduce you to an IP.

If you are considering purchasing a business or assets from an administrator, please get in touch. We have a wealth of experience in structuring pre-pack sale agreements and advising individuals and companies on purchases of distressed businesses and assets

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