The corporate insolvency procedures are designed to protect the interest of creditors so that they are treated fairly. A company becomes insolvent if the value of its debts is greater than the value of its assets, or when it is no longer able to pay its debts as and when they fall due.
We can offer advice on whether your company is insolvent, and professional guidance on any of the insolvency options identified below.
The procedures below offer a chance for the business to survive and can provide breathing space whilst a plan is put together to sell the business and assets as a going concern.
When a company is indebted to creditors and has no reasonable prospect of being able to turn the business around, the only inevitable outcome is liquidation.
- Compulsory Liquidation (winding up by court order)
- Creditors Voluntary Liquidation (winding up by resolution of the directors and shareholders)
A solvent liquidation can be used effectively as part of tax or retirement planning, or as a result of the company having achieved its specific purpose.
- Members Voluntary Liquidation (is a solvent liquidation initiated by the directors with a return of assets to the shareholders)
If at any time after the presentation of a winding-up petition (and before a winding-up order is made) the court considers that it is necessary for the protection of the Company’s property, it may appoint a provisional liquidator.
Receivership is a process initiated by banks or other creditors who have lost faith in a company’s ability to repay its debts. Receivers are appointed with a view to selling assets so that creditors can recover money owed to them.
The position in insolvency law is governed by The Insolvent Partnerships Order 1994. This created a hybrid of individual and corporate insolvency law, whereby bankruptcy of one or more partners is a possibility as well as the winding up of the partnership.
Once an insolvency regime is in place it often leads to a number of issues concerning the management of the business, the role and conduct of the directors and the ranking of creditor claims. Taking too long to cease trading leaves directors open to accusations of wrongful trading, and subsequent disqualification as directors.
For further information, please contact one of our Client Services Team who will be able to assist you.