Frequently Asked Questions

Back to support

Administration is a type of formal insolvency process aimed at providing protection to a company which is struggling financially. In an administration the company will be protected by the courts from creditors pursuing legal action which allows potential restructuring plans to be formulated without the threat of legal action from creditors.

A licensed Insolvency Practitioner must be appointed as Administrator to manage the company’s affairs through the administration process.

The directors of a company can elect to voluntarily enter administration with the assistance of a licensed insolvency practitioner. Alternatively, the company can be put into administration by the holder of a floating charge under a debenture granted after 15th September 2003. 

We will initially review your case free of charge, every case is different and therefore, we need to understand your circumstances before providing appropriate advice. It is only when you are happy with our advice we will look at your specific needs and the complexity of the case before outlining and agreeing our fees.

A pre-pack administration involves a relatively quick process whereby the business and assets of the insolvent company are sold to a third party (new company) leaving the liabilities to be dealt with by the Administrator. The procedure is managed by a licensed Insolvency Practitioner who will act on behalf of the court as Administrator.

The process should be completed within 12 months, although this can be extended by the consent of the court/creditors.

We will advise in each individual case what we believe is the most appropriate solution for your company. Pre-pack administrations are used in cases where if they are not sold the business will inevitably cease trading. Through the pre-pack route the business can be sold quickly reducing negative attention surrounding the financial situation and continue to trade under a new company whilst retaining customer, suppliers and employees.

There can sometimes be a financial pressure in a pre-pack administration case which we are able to assist with. Timescales largely depend on previous planning and the co-operation of those involved, however we will act quickly and effectively to complete the process.

In most cases the company directors will initiate CVA proceedings, but the liquidator or administrator can also promote a CVA on behalf of the company.

We will initially review your case free of charge, every case is different and therefore, we need to understand your circumstances before providing appropriate advice. It is only when you are happy with our advice we will look at your specific needs and the complexity of the case before outlining and agreeing our fees.

For a CVA to be considered an appropriate solution there are several aspects to consider:

  • Is the company able to regain profitability and increase turnover?
  • Can underlying problems be solved and current difficulties overcome?
  • Has the business received new capital investments and whether future capital injections are to be expected?
  • Can the employees adapt to the situation and implement essential changes to secure the business in the future?
  • Is the proposed CVA financially viable for the company considering future liabilities?

We will need various information about the company including, trading history, financial accounts, cash flow forecasts, and the reasons behind the company’s current situation. It is important as a director you ensure all information is made available to us and is accurate, such as any previous legal proceedings or financial difficulties the company has experienced.

A CVL is the formal process commenced by the directors of an insolvent company who have resolved to wind up its affairs.

The liquidation will continue until the liquidator is satisfied all assets have been realised and there are no matters outstanding that need to be investigated. The liquidation could therefore last for many years, but most liquidations are concluded within 12-18 months.

We will initially review your case free of charge, every case is different and therefore, we need to understand your circumstances before providing appropriate advice. It is only when you are happy with our advice we will look at your specific needs and the complexity of the case before outlining and agreeing our fees.

Once the board meeting has been held and it has been decided to place the company in liquidation, trading should cease unless it has been agreed with the proposed liquidator that trading should continue to enable the better realisation of the company’s assets.

 

Any deliveries of stock received after the board meeting should be held separately to one side until the appointment of a liquidator. In most circumstances monies received from book debts should be forwarded to the proposed liquidator to be held on trust until a liquidator is formally appointed. You will be advised if this is necessary. No further payments should be made to creditors.

You can act as the director of another company unless you are subject to a disqualification order, have given a disqualification undertaking, are an undischarged bankrupt, or are subject to a bankruptcy restriction order or undertaking. A disqualified person must obtain the permission of the court to act as a director or to be concerned in the promotion, formation or management of a company.

Section 216 of the Insolvency Act 1986 restricts the re-use of a name previously used by a company that has gone into liquidation; this includes a trading name or a name which is so similar that it suggests that there is an association with the failed company.

This restriction applies if;

  • You were a director or acted as a director of the failed company in the 12 months immediately before the date of liquidation
  • To any name used by the failed company in that 12 months

The restriction which prohibits a person to be a director or take part in the promotion, formation or management of as company using a prohibited name (and applies also to a partnership or a sole trade not just a limited company) for five years from the date of liquidation, does not apply if the other company had already been known by that name during the whole or part of the 12 month period and was not dormant in that time.

If you do not comply with this restriction or act as a director without leave of the court, you may be held personally liable for the debts of the new or successor company. You may also be committing a criminal offence. If you believe these restrictions may apply to you, you should seek advice on you own position.

An MVL is the formal process to close a solvent company. MVL’s can be a tax efficient process for shareholders to withdraw funds from a company upon its cessation, whether it be due to group re-structuring, end of company’s life, or maybe a shareholder’s dispute. The company must be solvent with more than £25,000 in assets and therefore able to pay its debts in full, together with any interest, within 12 months.

We will initially review your case free of charge, every case is different and therefore we need to understand your circumstances before providing appropriate advice. It is only when you are happy with our advice we will look at your specific needs and the complexity of the case before outlining and agreeing our fees.

Members must be completely certain about the financial stability of the company and its state of solvency. The company must be viable to meet all liabilities within 12 months of the MVL being accepted. A Creditors’ Voluntary Liquidation would be considered if the company was ultimately declared insolvent. Full tax implications need to be considered and understood by all members.

There should be no stigma attached to an MVL because all creditors are paid in full. It is only in the case of insolvent liquidation that director’s conduct is examined for possible disqualification proceedings.

In usual cases, a payment will be made to the member of 95% of the available assets, within a week of the appointment.

Once all creditors are paid in full any remaining assets will be released to members.

An MVL procedure releases the members from all accrued liabilities and provides a clean end to the company which will be dissolved 3 months after the conclusion of an MVL. For a company to use the striking off procedure it must have been inactive for at least three months and any accrued liabilities can be pursued for up to 12 years. However, under an MVL only the liquidator or an individual sufficiently interested can restore the company which must be within two years of the date of dissolution.

An IVA is an agreement between you and your creditors to help you pay off your debts at an affordable rate.

An IVA is a legally binding agreement between you and your creditors. This means if you have an IVA and stick to the agreement you’ll get protection from your creditors taking further action against you and some of your debt will be written off.

An IVA is available to all Individuals, whether they be employed or self-employed who are experiencing difficulty in meeting contractual payments to their unsecured creditors. This is providing they have a stable income and a surplus each month after paying for basic living costs.

As part of the process of setting up an IVA, we will assess your income and expenditure. This will help us ascertain your monthly contributions into the arrangement, ensuring that you can afford them and giving your arrangement the best possible chance of success.

The monthly payments that you make into your arrangement will cover the payments to your creditors as well as the Nominee’s and Supervisor’s fees involved in an IVA. These fees will not affect your monthly payments, as by agreeing to the terms of the IVA your creditors agree to accept a lower return from the arrangement. This means that the payments remain affordable for you.

Normally, IVA payments are usually made into an IVA over a period of 60 months (5 years). However, an IVA may be extended to six years if you have equity in a property.
Alternatively, you may be in a position to make a Full & Final offer to your creditors. This type of IVA would usually be for a maximum period of 12 months.

An IVA will continue as long as regular payments are maintained. Defaulting on payments could result in the failure of the IVA at which point, it is possible, that you could be made bankrupt.

Unlike bankruptcy, which will be published in the London Gazette and sometimes in your local paper, IVAs are not published. This is often a reason why people favour IVAs over bankruptcy as it is kept more private.

Your IVA will however be listed on the Insolvency Register, held by the Insolvency Service. Anyone can access the Insolvency register via the Internet.

No. – To be able to set up an IVA (which are regulated by the Insolvency Act 1986) you will need the services of a licensed Insolvency Practitioner (IP). The IP will also supervise your IVA throughout the duration of the Arrangement.

No, as an IVA is legally binding. Once an IVA has been approved, your unsecured creditors have no right to chase you for payments. However, they may still send you default notices and annual statements.

Bankruptcy is a form of insolvency and is normally only suitable if you can’t pay back your debts in a reasonable time.

Assets you own, such as your house or car will usually be sold to pay off your debts. This means if your assets are worth more than your debts, or if all of your regular payments are up to date and you can afford to keep paying them, bankruptcy is unlikely to be the best option for you.

You apply for bankruptcy by filing a form at: https://www.gov.uk/apply-for-bankruptcy

As well as applying for bankruptcy yourself, someone else you owe money to (a creditor) can apply to make you bankrupt, even if you don’t want them to. For a creditor to make you bankrupt, you must owe at least £5,000.

The court will either appoint an Official Receiver or an Insolvency Practitioner (IP) to act as the trustee in your bankruptcy.

The OR is a civil servant who works for the Insolvency Service and also acts as an officer of the court. He/she will have the responsibility of administering your bankruptcy and protecting your assets.

The OR is responsible for looking into your financial affairs for the period before and during the bankruptcy and is required to submit a report to the court and to the creditors on the findings of this investigation. As part of this investigation the OR will look for and must also report any indications that:

  • You may have committed criminal offences in connection with your bankruptcy
  • Your behaviour has been dishonest
  • You have been in any other way to blame for your bankruptcy

The OR will be required to make enquiries to banks, building societies, mortgage, pension and insurance companies, solicitors, landlords and any other organisations that may be able to provide details of any assets or liabilities that you have, or have had, an interest in.

Normally a bankruptcy will last a maximum of 12 months until the automatic discharge applies. Charges on future earnings, assets and property values will continue for 36 months (three years) if you have net disposable income.

While you are un-discharged from the bankruptcy, it is a criminal offence to obtain credit of £500 or more without disclosing your bankruptcy. You also should not carry on a business in a different name from the one you were made bankrupt with.

This is often a worry for many people considering bankruptcy; however, since 2009 this has not been a common practice, unless there are exceptional circumstances requiring publication.

We also act in accordance with the Data Protection Act and uphold the strictest standards on confidentiality. The only publication your notice of bankruptcy will appear in is the London Gazette. This is a publication primarily read by people working within the professional and financial services sector.

If you own your own home, it is possible that it may have to be sold, however it is also possible that it will not, subject to available equity, a purchase of the beneficial interest by a 3rd party or annulment procedure may save the home.

The most important thing to do if a Director thinks the Company may be insolvent is to seek professional advice as soon as possible. This advice will need to be sought from a Licensed Insolvency Practitioners such as ourselves.

The earlier the advice is sought the more options may be available to the Directors. There are options not just for closure of the Company but potentially to save the Company as a going concern

The most important thing to do is to seek help as soon as you can. We offer a free initial consultation and we can discuss your financial position.

Burying your head in the sand will not make your creditors go away, so you can discuss which debt solution is best for you by contacting us. link to contact form.