Formal Procedures

Under UK Insolvency legislation there are various procedures designed to protect companies from creditor action whilst attempts are made to rescue the company or its business, or to enable legally binding compromises to be entered into. This is just a summary of the principal tools available to restructuring and turnaround specialists

Administration

This procedure is useful where:

it is simply not possible to reach agreement with creditors to a compromise or restructuring through out-of-court consensual means
agreement is not possible within a manageable time scale. It may be for example that whilst negotiations with the majority creditors are proceeding well, minority creditors are pursuing the company through legal process which threatens to bring the company down prematurely
the company is insolvent and the directors are concerned about the risks of wrongful trading.

In these circumstances it may be advisable to place the company in Administration. This is a legal process, which requires the appointment of a licensed insolvency practitioner as Administrator and creates a legal stay against creditor action and provides a breathing space in which to develop further proposals to creditors.

Under the Enterprise Act 2002 which came into effect on 15th September 2003 this process has been considerably streamlined and no longer requires petitions, independent reports and a court order, merely now requiring a filing in Court. Once the purposes of the Administration have been met (eg approving a CVA – see below), and subject to being solvent, the company can exit from Administration and revert to the executive control of its management.

Our Consultants who are licensed insolvency practitioners are able to accept appointment as Administrators

Company Voluntary Arrangement (CVA)

This is a formal process enabling a compromise to be entered into between a company and its creditors based on a vote passed by a majority in excess of 75% of those creditors voting on the proposal. All creditors are legally bound including those who were non-voting. This is a powerful tool particularly where there are dissenting minorities.

Our Consultants who are licensed insolvency practitioners are able to accept appointment as nominees and supervisors of CVAs.

THE EARLIER AN UNDERPERFORMING BUSINESS IS IDENTIFIED THE BETTER THE OUTCOME