Formal insolvency options
Administration – usually used to allow the business to continue to trade, while a longer term solution can be found. This can be refinancing of the business, a sale of the business or a CVA. It is usually the directors who appoint a licensed insolvency practitioner who takes executive control of the company. In most cases an appointment can be made out of Court within a few days. A notice can be filed in Court to give instant protection from the creditors.
Administrative receivership – similar to Administration, but is initiated by the holder of a debenture, normally a bank. This is only available when the company has an older (pre September 2003) debenture.
Company voluntary arrangement – is a formal arrangement with all the company’s creditors to accept (normally) a partial payment over a period of time in settlement of their debts. The arrangement needs to be supervised by a licensed insolvency practitioner, but day to day control remains with the directors.
Creditors voluntary liquidation – sometimes a company has simply come to the end of its life and needs to be closed down. This is the main purpose of a liquidation which is initiated by the directors and shareholders of a company passing a resolution to wind the company up. A meeting of creditors is held to appoint a liquidator who then deals with the winding up.
Complusory liquidation – also winds up a company but it is a court driven procedure and it can take two to three months before a winding up order is made and a local Official Receiver appointed in the first instance. It can then be another two to three months before a licensed Insolvency Practitioner is appointed to deal with the assets.
Click here for FAQs on corporate insolvency and here for FAQs on directors' responsibilities.