Services

The administration procedure was introduced by the Insolvency Act 1986 to provide a company facing financial difficulties with a breathing space during which time a rescue package or a scheme for the more advantageous realisation of assets could be put in place.

During the period of administration, the company will be managed by ‘the administrator’ and there will be a moratorium on actions against the company.

Administration proceedings are intended primarily to facilitate the rescue and rehabilitation of insolvent but potentially viable companies. An administrator’s objective is to consider and effect the reorganisation of a company in order to restore profitability and to carry on its business, in whole or in part, and/or to make proposals for a better result for the creditors over that which might occur on immediate winding-up.

The administrator of a company must perform his/her functions with the objective of:

1. rescuing the company as a going concern, or
2. 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
3. realising property in order to make a distribution to one or more secured or preferential creditors.

An administrative receiver can be appointed by a secured creditor holding a debenture that grants a floating charge over a company's assets, provided that the charge was created prior to 15 September 2003.

An administrative receiver is appointed over all the assets and undertaking of the company and the process is likely to be used to trade a company to facilitate the sale of the business as a going concern.

The insolvency legislation grants wide powers to administrative receivers but also controls the exercise of those powers to try to mitigate potential prejudice to unsecured creditors.

This is a legally binding agreement between a company and its creditors that allows a company to pay its creditors, in full or in part, over a specified period of time.

The purpose of the procedure is to allow an insolvent company to continue trading so that creditors can be repaid from trading revenues, thereby facilitating a greater return to creditors than would otherwise be achieved in a winding-up.

A moratorium is also now available for “small” companies, which stops creditors from taking action against the company whilst the directors formulate a proposal.

A company will be placed into creditors’ voluntary liquidation by its members on the basis that the company can no longer service its liabilities and has no prospect of survival.

A company can be placed into liquidation on very short notice with the agreement of 95% of its shareholders.

This is a creditor-driven process which allows a creditor to petition for the winding-up of a company through the Court. Upon the petition of an unsecured creditor, a hearing date will be set by the Court at which a winding-up order will normally be made.

A liquidator is then subsequently appointed either by the creditors (at a meeting of creditors convened by the Official Receiver) or by the Secretary of State following an application by the Official Receiver.

This is a creditor-driven process which allows a creditor to petition for the bankruptcy of an individual in respect of an unsecured debt in excess of £750. A debtor may also petition for his/her own bankruptcy if he/she has no prospect of being able to repay his/her debts.

This is a legally binding agreement between an individual and his/her creditors which allows the individual to repay the debts, in full or in part, over a specified period of time (typically 2 to 5 years).

This gives an individual breathing space to repay his/her debts within a structured framework and will provide creditors with a better return than would otherwise be achieved in a bankruptcy.

A partnership liquidation is invoked where the partners have decided that the partnership has no viable future or purpose, and a decision may be made to cease trading and wind up the business.

As with winding up a company, there are two basic ways that the partnership can be wound up: the creditor’s petition and a partner’s petition.

Creditor's Petition in a Partnership Liquidation
A creditor can petition to wind up the partnership, and at the same time decide whether or not to petition for the bankruptcy of each of the partners, some or none.

Partner's Petition in a Partnership Liquidation
The partners can petition to wind up the partnership and also petition for their own bankruptcy or not. The partners may decide that instead of bankruptcy they would be able to contribute to IVAs.

The Insolvent Partnerships Order 1994 (IPO1994) provides for a voluntary arrangement of an insolvent partnership and for voluntary arrangements of the individual members of an insolvent partnership. Both corporate and individual members of a partnership may enter into voluntary arrangements. Where a partnership voluntary arrangement (PVA) is proposed it may be necessary to propose IVAs for the partners to run concurrently with the PVA.

The arrangement should provide for both partnership creditors and for the creditors of the individual/corporate members of the partnership.

This differs from a creditors’ voluntary liquidation in that the company will be solvent. The shareholders of a company will utilise this process to facilitate the closure or restructure of a company’s business.

It provides for all creditors to be paid in full (together with interest) within a maximum period of 12 months and for the distribution of any surplus to its shareholders.

This process allows a liquidator to accept shares in a company as consideration for the distribution of assets of the company being wound up.

It is used for company demergers and reconstructions and in both scenarios, tax benefits are always important factors.

An informal arrangement is an agreement with your creditors to repay your debt at a reduced amount. This may be because you are experiencing financial difficulties for various reasons and may therefore be unable to cope with the minimum monthly payments on your debts. There is no Court involvement on this type of arrangement and although it is not legally binding on you or your creditors, it is still a form of agreement and can, in certain circumstances, be an effective way of managing your debt problems in the short to medium term.