Limited Company Insolvency
As a company grows and develops it often faces a variety of problems. Creating solutions for such challenges are as unique as each company. A one size fits all approach does not work.
There are many industries and markets with issues that are exclusive to each sector. Therefore we aim to understand your business before providing advice that gives a solution that is most appropriate for the company.
We look at all stakeholder interests (employees, shareholders, creditors, directors, etc) and attempt to provide an overall approach that will resolve the current difficulties.
Some of the solutions we have offered to companies, directors and shareholders follow formal insolvency procedures. Some do not.
To contact us either:
Advice for directors
Our corporate insolvency work can lead us from time to time, to consider wrongful and fraudulent trading. We are, therefore, ideally placed to advise directors on these subjects and the effects of the Company Directors Disqualification Act 1986. Similarly when requested we are able to advise creditors of insolvent companies regarding this area of legislation and can be called on as expert witnesses in this field.
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Survival of the business - rescue & recovery
Administration Order ("AO")
An AO protects a company from its creditors. The directors or members can lodge papers in Court to obtain an AO, with or without the knowledge of an Insolvency Practitioner, although prior agreement may be an advantage!
The Administrator takes control of the business and with the assistance of its management prepares a plan to return the company to profitability. The plan is then presented to creditors.
The Enterprise Act 2000 introduced a streamlined process for obtaining an AO, which used to be an expensive and time consuming process.
Company Voluntary Arrangement ("CVA")
A CVA is proposed by the directors to both the members and creditors of the company. The CVA is usually a mechanism to allow time for a restructuring or reorganisation plan to be carried out, ultimately resulting in a return to profitability and the payment of a reduced or deferred dividend to creditors.
The intention is that the restructured company will be able to continue to trade successfully.
Administrative Receivership ("AR")
Where a company has granted security over its assets to a lender but is unable to meet repayments due to that lender, the lender may be entitled to appoint an AR to safeguard the company’s assets in lieu of repayments. The AR is entitled to sell these assets to pay any monies due to the lender.
The AR owes his duty to the lender, not the company or its creditors. The AR will sell any part of the business that can be sold as a going concern. The employees will usually transfer to the new owners of the business. Depending on the offers received the AR may sell the business to existing managers or shareholders.
However, it may not be possible to rescue even a part of the business.
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Demise of the business – winding up
Creditors’ Voluntary Liquidation
It is in the interests of directors to take action at an early stage in order to minimise their personal risks in an insolvent company. In a CVL the directors summon a meeting of members and formally recommend that the company can no longer continue to trade and should be wound up. Although the directors and members can recommend the appointment of a particular insolvency practitioner the creditors alone are able to confirm the appointment.
The Liquidator takes control of the company and manages the orderly realisation of all assets agreement of creditor claims and any dividend payments. The company is dissolved after the final meetings of members and creditors.
Compulsory Liquidation
An unpaid creditor of the company can petition the Court to wind up the business. The Liquidator will be the Official Receiver, although if the company has any significant assets the Official Receiver will usually call a meeting of creditors to seek the appointment of a private sector Liquidator.
The Liquidator takes control of the company and manages the orderly realisation of all assets agreement of creditor claims and any dividend payments. The company is dissolved after the final meeting of creditors.
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"Just had enough"
Members Voluntary Liquidation ("MVL")
There are many reasons why a company may wish to be wound up even though it is solvent. One of the key elements in today’s business environment is a lack of appropriate successors to the current directors and shareholders – who are often the same group of people for SME’s [Small to Medium Enterprises].
If all creditors are likely to be paid in full from the sale of the company’s assets, then there is the potential for a return to the members, i.e. the shareholders.
In such circumstances Mitchell Charlesworth can advise the directors and members of what needs to be done in order to create the best possible outcome for the shareholders – who are always the last in line to receive monies back from a winding up.
Whatever the circumstances, Mitchell Charlesworth can provide impartial advice and an initial consultation that is free of charge.
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To contact us either:
- Call 0161 817 6100 and speak with Jeremy Oddie or Julie Beavis or Paul Palmer
- Complete our Insolvency Enquiry Form
- Fax us on 0161 817 6102
- Write to us at: Mitchell Charlesworth, 6th Floor Brazennose House West, Brazennose Street, Manchester M2 5FE
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