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A Company can be wound up using this process if it is solvent. That means its assets exceed its liabilities and the surplus of assets once the creditors have been paid are distributed amongst its shareholders.
The Company can be placed into MVL in a relatively short time frame. Insolve Plus’ experienced staff would draft all the necessary documents in order for the Company to be placed into MVL, which can be done desired. A detailed description of the process of placing a Company into MVL can be found here (link to MVL page).
This will depend on the complexity of the liquidation and number of creditors and shareholders. A MVL would start from £3,500 plus VAT and disbursements. The costs would increase if the liquidation is more complex, there are multiple payments to be made to creditors and shareholders, or if there are outstanding returns, issues or investigations being undertaken by HM Revenue & Customs or other third parties. Contact Insolve Plus to obtain a quote specific to the Company that you wish to place into MVL.
No. You are able to liquidate your Company even when it has outstanding creditors and there are sufficient funds to pay them. Statutory interest would also need to be paid. This may impact the cost of liquidating as it would mean more work for the liquidator. If you would like to keep the costs down it is suggested creditors are paid prior to liquidation but sometimes this is not always an option.
As HM Revenue & Customs charge Statutory interest on any amounts due to themselves from the day the Company is placed into liquidation, it is beneficial to the shareholders if any tax due is settled prior to liquidation. Sometimes this is not possible and the liquidator will agree and pay any tax due as soon as reasonably practicable, together with the accrued Statutory interest.
How long will it take for the shareholders to receive a dividend? Will they receive all the funds at the same time?
This will depend on the assets the Company has detailed in its balance sheet. If it is solely cash at bank, subject to any perceived tax liability and creditors being paid, a significant percentage can be distributed as an interim dividend. Once all assets have been realised and liabilities have been settled, a final dividend will be declared and paid.
Yes. This is known as a distribution in specie. As an example, properties are sometimes distributed in this way if the shareholders do not want the property sold and wish to obtain ownership once the Company has been liquidated.
There could be personal tax implications for the shareholders. We would suggest you seek independent taxation advice from a qualified professional who will be able to advise the shareholders on the most tax efficient way of receiving their funds. We do not provide this advice.
What happens if following the liquidation, it becomes apparent there are insufficient funds available to pay all creditors in full?
Should this situation occur, there are potentially serious consequences for the directors as a Declaration of Solvency has been sworn. The solvent liquidation would need to be converted into an insolvent Creditors Voluntary Liquidation. There will also be an investigation into the directors conduct.
Administration is an insolvency procedure which protects it from legal actions by its creditors, unless the administrator gives permission. It prevents winding-up petitions being filed at Court and other legal actions to recover outstanding amounts against it and allows for the Company to be restructured or the business and assets sold. If this is not possible then the assets are realised for the benefit of its creditors.
There are three objectives that are available to the administrator and they are either
- Rescuing the Company as a going concern; or
- Achieving a better result for the Company’s creditors as a whole than would be likely if the Company were wound up, without first being in administration; or
- Realising property in order to make a distribution to one or more secured or preferential creditors
There are three routes into administration. These are:
- By an Order of the Court
- Appointment by a qualifying floating charge holder (usually your Bank or asset finance provider This could also be anyone who you have granted security to, subject to it having a qualifying floating charge)
- The Company or its directors
Once in administration, the administrator takes over the day to day management and control of the company. As a director, you will no longer have control as all decisions are taken by the administrator. If the Company is to continue to trade whilst in administration, the administrator will assess the Company’s position to ensure it will be supported by its suppliers, employees and any other key stakeholders during the trading period. Funding will also be reviewed.
The business and assets will be marketed for sale and subject to any offer being accepted, will be transferred to the successful purchaser.
Can a director make an offer to buy the business and assets of the Company once it is in administration?
Yes they can. This will be negotiated through the agent appointed by the administrator. Details of any sales to connected parties must be disclosed in the next report they provide to creditors.
A pre-pack administration is where the sale of the business and assets of a Company are sold almost immediately after the appointment of the administrator. This is agreed prior to the administration.
They usually achieve a better outcome for creditors and it preserves the business as they allow for a seamless transfer of the business into the purchasers Company, preserving goodwill. Employees are transferred to the purchasing Company, reducing any redundancies that would have occurred had the Company ceased to trade.
If the pre-pack is to a connected party, the administrator will recommend they submit the proposed deal to The Pre-Pack Pool for an independent review.
The Pre-Pack Pool is an independent body of experienced business people who offer an opinion on the purchase of a business and/or its assets by connected parties to a Company where a pre-packaged sale is proposed. This provides some level of comfort should the pre-pack sale be scrutinised at a later date.
A Company is insolvent if it is unable to pay its debts as they fall due or if its debts exceed its assets.
You should seek advice from a qualified insolvency practitioner at the earliest opportunity who will explain the options available to you. You should also avoid accruing additional credit once you have identified the potential insolvency which could place the company in a worse position and have consequences for you as a director.
A Statutory Demand is a formal document that is issued by a creditor which demands payment of an outstanding debt in excess of £750 within 21 days. If the debt is not repaid or disputed within the 21 day period, the creditor is then able to apply to Court to issue a winding-up petition against the Company. If you are in receipt of a statutory demand, you should seek independent professional advice, without delay.
A winding-up petition is a formal legal document where a creditor has made an application to Court to place the COmpany into Compulsory Liquidation. If your Company has received a winding-up petition you should act immediately. Once it is advertised, the bank will freeze your Companjy’s business account. If you do not settle the debt, request it be withdrawn or apply to have it struck out, there will be a Court hearing where a judge will make a ruling based on the evidence supplied by the creditor whether to issue a winding-up order. If this happens, the Company is immediately placed into Compulsory Liquidation. There are additional options available to you which are to obtain an Administration Order or propose a Company Voluntary Arrangement, but these will depend on the Company’s circumstances and the timing of such decisions. Seeking advice at the earliest opportunity is key.
Not if the Company has outstanding debts. A director should not apply to have the Company struck off if they are aware of unpaid creditors or it has assets that are still owned by the Company.
No. A liquidation is a complex legal process which can only be undertaken by a Licensed Insolvency Practitioner.
There is no charge for the first meeting between you as a director and one of our Insolvency Practitioners. This provides you the opportunity to ask questions about the process and for us to gather information so we can provide the best advice for the situation you find yourself in.
An costs of the liquidation are usually gets paid from the assets realised during the liquidation process. If there are no assets in the Company, then a third party can pay the costs. The director may be asked to contribute to the costs or provide a personal guarantee to cover the costs of placing the Company into liquidation.
The cost will depend on the size of the Company, value of assets, number of creditors and employees. As an example, the costs of placing a small company with minimal creditors and employees, into liquidation, would be £5,000 plus VAT and disbursements. Contact Insolve Plus to obtain a quote tailored to the Company you wish to liquidate.
Once you have decided to liquidate your Company you will receive an engagement letter. Once this is signed and returned to us, a board meeting will be held where certain resolutions are passed resolving to cease to trade and to commence the liquidation process. The liquidation date for the Company is usually three weeks from that point.
No. We will prepare all the documentation required to start the procedure and will guide you through the process at each step.
Yes we will. You will be contacted by one of our experienced colleagues who will run through various questions which will enable us to compile a report that will be sent to all known creditors prior to the liquidation date. This will include financial information and a history of the business together with the reasons for insolvency.
There will be a shareholders meeting followed by a virtual creditors meeting. Prior to the creditors meeting, the members hold a meeting where they resolve to place the Company into liquidation. Resolutions and minutes are signed and this is the point of liquidation.
At Insolve Plus, we usually recommend calling a virtual meeting of creditors. This will be conducted by either telephone or video link. On the day, we would ask that you attend our office so the relevant resolutions and minutes can be signed. This will also be the opportunity for creditors to ask questions regarding the events surrounding the liquidation together with any other pertinent questions they may have regarding the Company in general or the conduct of the directors.
Yes there are. One other option is called Deemed Consent. This is where no meeting of creditors is convened and a date is set for the liquidation to commence. This can be challenged by the creditors who can demand a physical meeting be convened. In order for the creditors to request such a meeting they need to reach one of three criteria, that being 10% of creditors in value, 10 individual creditors or 10% of creditors in number supporting the request for this type of meeting. The physical meeting will be convened and held up to 14 days thereafter.
These will be collected by the appointed liquidator and stored securely.
Will I still have to file accounts and confirmation statements at Companies House following the liquidation?
No, once the Company enters liquidation the filing requirements of the director cease.
No, you will still be shown as a director at Companies House although your powers as a director will have ceased on the day of liquidation.
Once the Company is in liquidation, it is the duty of the liquidator to achieve the best possible realisable value of the assets. An agent will be appointed to schedule and value the assets and they will seek purchasers either by a private treaty sale or auction.
Yes they can. This will be negotiated through the agent appointed by the liquidator. Details of any sales to connected parties must be disclosed in the next report they provide to creditors.
This is a possibility but not advisable as there are restrictions under Section 216 of the Insolvency Act 1986 which prohibits directors of an insolvent Company re-using a Company name. Independent legal advice should be sought by any director considering using a similar Company name or trading name.
A liquidator is under a duty to investigate the conduct of the directors spanning back three years prior to the liquidation date. This also applies to any director who had resigned within that time period. A report will be submitted to The Insolvency Service pursuant to the Company Directors Disqualification Act 1986 on any issues flagged during the investigation process. It is then considered by The Insolvency Service whether to commence action or to close their file.
If you have an overdrawn directors loan account, meaning that you owe the Company money, then this is classed as an asset of the Company and as such will need to be repaid. It is ideal to open dialogue on this issue at the earliest opportunity so that expectations over repayment can be managed. It is possible to stagger repayments over a reasonable timescale.
If a personal guarantee has been provided to a creditor then they will expect you to pay the outstanding sums should the Company not be able to. You should always seek independent professional advice on the validity of personal guarantees prior to making any payment. Insolve Plus is happy to recommend professionals who could provide advice, if so needed.
Unless there are exceptional circumstances, the debts due to HMRC, by the Company, will remain within the Company and they will rank as creditors alongside the other creditors.
There are certain, unusual circumstances where this is possible, such as wrongful trading, preference, misfeasance and illegal dividends. If you are concerned about potential liability, then you should discuss this with the proposed liquidator at the earliest juncture as it may affect the decision to liquidate the Company. Alternatively, you could seek independent legal advice.
If you were paid via the Company’s PAYE scheme and have a contract of employment, you will be able to apply to the Insolvency Service for redundancy pay. It will be their decision, based on the information you and the liquidator provide, whether you are eligible for payment from the Redundancy fund. This also applies to the employees of the Company.
Once all assets have been realised and after costs, subject to their being any funds available, a dividend is paid to the creditors. A final report is sent to the creditors explaining what has happened during the liquidation. This is also filed at Companies House and after approximately three months thereafter the Company is struck from the register.
A CVA is a legally binding agreement (“the proposal”) with your company’s creditors to allow a proportion of its debts to be paid back over time.
Once the proposal has been approved, the unsecured creditors are bound by the arrangement. The company can carry on trading as usual, and the directors remain in control. The CVA is monitored by a supervisor who has to be a licensed insolvency practitioner. The arrangement usually lasts for 2-5 years but is unique to each situation.
A CVA is the best rescue tool for a company that is viable going forward but has historic debt. The directors remain in control and are able to trade out of their current financial problems provided that they have addressed the issues that caused the debts in the first place.
Entering into a CVA isn’t free, but compared to most other insolvency solutions it’s relatively affordable. A CVA also typically offers a better deal for a company and its creditors by ensuring creditors receive at least some of what they are owed.
Usually monthly contributions are made into the CVA, which can be distributed to creditors on a regular basis. The Company can also offer a lump sum contribution. Each case is different and this may not be affordable in every case.
Yes. Once the CVA is in place no enforcement action can be taken by pre-CVA creditors. Post-CVA creditors must be paid on usual terms.
It is usual that a percentage of the pre-CVA debt is repaid and this is part of the proposal put to creditors to either agree, modify or reject. This will need to be supported by a business forecast.
Although a CVA is usually the best option for a viable but insolvent company, it isn’t the only option. Common alternatives to a CVA include administration and pre-pack administration, as well as emergency loans and financing options.
If a company is unviable, it will not be able to enter into a CVA with its creditors and should pursue an alternative such as creditors voluntary liquidation.
75% of unsecured creditors by value must approve a CVA. This is 75% voting on the day. 50% of non-associated creditors by value must also vote in support.
Company directors are required to act in the interests of creditors in the event that their company becomes insolvent. If continuing trading is in the interests of the company’s creditors, the company should continue trading as normal.
Yes there are two methods: one relies on case law and the other is a formal moratorium. For a full explanation of how the new Acts moratorium process works talk to one of our insolvency practitioners.
This protection will allow time for all creditors to consider the Company Voluntary Arrangement without fear that any one creditor may seek to upset the process.
The existing Directors and management will control the company.
A Nominees fee will be charged, which will depend on the business size, to establish the CVA, which involves proposing and entering into the CVA. This Nominee’s fee can be deducted from the payments that the company makes to its creditors. This means that they won’t put a short-term strain on the company’s cash flow in the way a lump sum payment would. After the CVA is approved, a Supervisors fee will be charged which is also deducted from the realised assets.
Typically 28 days from the outset.
Secured creditors do not vote in a CVA as they rely on their security. In some instances they may value their security which means they will place a value on their secured claim and can vote on the remaining balance as an unsecured creditor.
There is no statutory requirement for the Directors to advise their customers that the company has entered into a Company Voluntary Arrangement. However, it may be in the Company’s interest that the Directors are upfront with their customers for the important reason that rumors may spread in the industry which would lead to customers quickly losing faith in the business.
The Directors can explain to customers that the CVA will enable them to focus on the service they provide rather than concerning themselves with the company’s financial position. Loyal customers may look to help the company for example by ensuring prompt or early payment for goods and/or services provided.
There is no reason why the Company Voluntary Arrangement will prevent a company from delivering a reliable service. There is therefore no reason why customers would walk away from a company that has chosen the CVA route. Whether the company decides to inform the customers is the decision of the Directors.
Whilst it can be a worry that existing creditors will vote against the proposals, it is often within the best interests of the creditors to work with the Company Voluntary Arrangement process rather than against it. Creditors will ultimately want any debts owed to them to be paid back. If the business is viable, it is likely that they will want to continue working with the company. They will be disappointed but by proposing a CVA the Directors are showing them that they are trying to maximise Creditors’ interests so it can often be viewed positively.
The best strategy would be to talk to them asserting that the assets are charged to secured creditors, if applicabe, and that the company is seeking to maximise all creditors’ interests by proposing a CVA. Payment of their outstanding costs can often remove the pressure whilst not actually paying the petitioning creditor’s debts.
In extreme cases the debt itself may have to be repaid. If the amount owed is too high then the company may have to enter administration to prevent the legal actions escalating. However this is an expensive option so exhaust all others first.
It is likely that some employees will have to be made redundant as part of the process of restructuring and streamlining the business but there may be a concern that staff vital to the business going forward may decide to leave.
If employees walk out they will lose any employment rights and will not receive any redundancy or lieu of notice payments from the company or the Government. They may not be eligible for unemployment/job seekers benefit. Therefore, they often stay.
If they have a new job to go to there is little however to be done to stop disgruntled employees leaving. But if the employees can be involved as part of the recovery – perhaps by offering a share package or other incentive as part of the long term strategy, the key employees may be retained.
The length of a CVA depends on each company’s financial situation and its ability to pay its creditors. Typically, CVAs last for between two and five years, although some CVAs can last for more than five years. Each case is unique so please contact one of our insolvency practitioners who will be able to advise you of your options.
If a company fails to achieve its objectives after entering into a CVA but still has a viable future, it may be possible to amend the CVA to cover a greater amount of time or allow the company to make a lower monthly payment.
In order to amend a CVA, a second creditors meeting is held and creditors will vote to approve or reject any amendments to the original arrangement.
These are guarantees that cannot be removed until the debt is paid off. The longer term repayment to secured creditors should be considered as part of the overall restructuring. Once the debt is cleared there is no reason why PG’s cannot be removed.
A CVA will not lead to these PG’s being called in as long as a careful plan to deal with secured debt is set out to the lender.
No. they can be used in future providing they are recognised losses.
Once a company completes its CVA, it can continue trading as normal without its previous debts. If the company complied with the terms of its CVA and made all of its payments to creditors, its remaining unsecured debts included in the Arrangement will be written off.
Entering into a CVA will negatively affect the company’s credit rating, but it doesn’t mean the company can never use credit again. If the company returns to a strong financial position it will be able to work out credit terms with suppliers.
If you would like to discuss the prospect of placing your company into a Company Voluntary Arrangement then please contact one of our insolvency practitioners who will be able to advise you of your options and to discuss whether it is a viable route for you.
A moratorium allows directors to continue to run a Company under the supervision of a Licensed Insolvency Practitioner, the ‘Monitor’, subject to certain restrictions.
The moratorium suspends a floating charge holder’s ability to crystallise their charge or appoint an administrator.
Yes, unless specifically excluded. For instance, banks and other regulated entities can’t appoint a Monitor. In addition, if your Company is the subject of another insolvency process at the time of filing, for example a liquidation, CVA, has an outstanding winding-up petition, is already in administration or is subject to an interim moratorium with a view to entering into administration it will be ineligible.
In addition, Companies that have been subject to a CVA, administration or another moratorium in the last 12 months will also be ineligible, other than during the COVID Period.
The Moratorium commences when certain documents are filed at court by the Company and the Monitor. The Monitor will also be required to provide a statement stating that it is ‘likely’ that the moratorium will result in rescue of the company as a going concern.
There are a number of routes available such as a CVA, restructuring or a refinance. There is no requirement to specify how the company will be rescued.
You do not have to obtain consent, or even provide notice to any secured creditor prior to filing the documents at Court.
The moratorium automatically ends 20 business days from the day after the moratorium comes into force. This can however be extended by a further 20 business days without creditor consent. It can also be extended for up to 12 months with the consent of creditors and/or a court order.
The moratorium will automatically be extended in some cases. For instance, where the Company proposes a CVA or is brought to an end if the Company enters into administration or liquidation.
The Monitor is obliged to end the moratorium in certain circumstances. For example, if the Company fails to pay certain debts that fall due during the moratorium, such as wages, trade or finance creditors, or the Monitor determines that the moratorium is no longer likely to result in the rescue of the Company as a going concern.
The Company will benefit in a number of ways. The Company will receive a payment holiday from certain pre-moratorium debts which are usually in the main amounts owing to suppliers. However, the following will still have to be paid during the Moratorium period:
- The Monitor’s remuneration and expenses;
- Goods or services supplied during the moratorium;
- Rent (for the moratorium period only);
- Wages, salary and redundancy payments (not limited to those falling due during the moratorium); and
- Debts or other liabilities arising under a contract or other instrument involving financial services. The usual capital repayments and interest due to lenders will still likely be payable unless agreed with the lender.
During the Moratorium period various actions of creditors will be prevented:
- Floating charge holders cannot crystallise their charge or appoint an Administrator;
- Creditors and shareholders of the Company cannot commence insolvency proceedings;
- No steps can be taken to enforce security without consent of the Monitor or Court.
- Finance Companies are not able to repossess hire-purchase goods without Court consent;
- No proceedings or other legal processes, except certain employment claims, can be commenced or continued during the moratorium without Court consent;
- Landlords cannot forfeit leases without Court consent;
- No security can be taken over the Company’s property without the Monitor’s consent; and
- Pre-moratorium creditors cannot apply to Court to enforce their debt.
There are also restrictions and obligations of the Company and its directors, including a £500 restriction on credit, the inability to enter into certain types of contract and a threshold on payment of pre-moratorium debt without the Monitor’s consent.
You make an online claim through the Government’s Insolvency Service.
The Insolvency Service has a helpful online factsheet www.gov.uk/government/publications/redundancy-payments-rp1-fact-sheet/what-to-do-when-youve-been-made-redundant
This is done online via www.gov.uk/claim-redundancy
This is dependent upon how busy the Government’s Insolvency Service is at the time. Payments can take between two and twelve weeks.
You should contact the Government’s Insolvency Service as they are responsible for making payment to you. However, the Insolvency Service request that you do not contact them to check the status of your application until after six weeks from making your application have passed. The Insolvency Service can be contacted by email: firstname.lastname@example.org
No. Insolve Plus does not have details of the status of your claim and has no ability to speed up payment. All enquiries should be directed to the Government’s Insolvency Service.
This will depend on the level of your salary. There is a statutory maximum set by the Insolvency Service which as at 6 April 2020 was set at £538 per week. If your weekly salary is in excess of the statutory maximum then the balance will be a claim in the relevant insolvency process.
If you have been working for your employer for two years or more then you will normally be entitled to redundancy pay.
The Insolvency Service will be able to take you through the process of claiming outstanding salary, holiday pay and notice pay. Please use the links below for more information.
Please contact the insolvency practitioner who will be able to claim for any unpaid pension contributions not credited to your pension scheme.