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Is Your Business At Risk?

The first port of call when considering regaining control and depressurising your company’s financial situation. This is where you come to an informal agreement with specific creditors over outstanding debts owed to them. This could take the form of rescheduling payments over an agreed period of time, perhaps longer than the creditor would ideally prefer, in a way that the business can afford and creditors get paid.

The disadvantage to an informal agreement is that it’s not legally binding. The creditor can change his mind and withdraw from it at any time, commencing formal proceedings against your business to recoup the debt. Also, whilst you are undergoing the terms of this agreement, it does not prevent other creditors taking action against the business and seeking recompense for monies owed.

The advantage is where the business perhaps has a key supplier who, through the informal arrangement, can see direct benefit from taking part since they are being consulted at an early stage. It may be that they get paid (eventually) in full – whereas with a formal voluntary arrangement this is not always the case.

At Augusta Kent, we have extensive experience in advising clients throughout these negotiations. We will be able to assist, where required, in developing solutions along this route, if it is an appropriate solution that best meets your interests in the short and long term. Contact us for your free initial consultation today.

Company voluntary arrangement is a useful rescue procedure for viable companies who have found themselves in short term financial difficulties and need a little breathing space but do not wish to relinquish day to day running control of the Company to an insolvency practitioner. The Directors are still in office and in full control of the company and all contracts (including employees) continue. In a CVA it is, to the main, business as usual.

Commonly referred to as CVA’s, this process ties in the company and its preferential and unsecured creditors into a formalised contract which, subject to the correct ratification by the requisite majority of creditors, becomes legally binding to all parties.

All creditors are contacted as part of the CVA process and, as there is no formal statutory advertising involved, there is usually minimum disruption to the goodwill of the business.

Provided there are no unforeseen events affecting the company, the CVA enables its rescue and continued success often with a revised trading strategy. The pre CVA creditors benefit from continued trading relationship with the company and a greater dividend than if they had sought to wind the company up.

Voluntary arrangements are supervised by a licensed insolvency practitioner who acts in the role of Supervisor throughout the term of the CVA. The Supervisor is nominated in the first instance by the company, followed by ratification from the company’s unsecured creditors.

This constructive solution enables the company to move forward as a viable business, continuing to trade with creditors who may themselves be compromised if the company ceased to trade.

With CVAs, the earlier you act the better chances of success. Get early advice and contact us today for a free consultation with a licensed insolvency practitioner.

A powerful rescue procedure that is quick to initiate and provides a moratorium which protects a company and its assets from almost all types of creditor action against it. This is useful when aggressive creditor action could fatally impact the business and affords the company time to reorganise and/or realise assets.

The administration must serve one of three purposes:

  • To rescue the company as a going concern, or failing that;
  • To achieve a better outcome for creditors than if the company first went into liquidation, or failing that;
  • To pay preferential and secured creditors.

An administrator (who is always a licensed insolvency practitioner) can be appointed by the directors of the company, a secured creditor or by the court. The Administrator immediately takes control of the company with the aim to either save it as a going concern or to achieve a better result than through the route of liquidation.

This could mean continuing to trade the company (if sufficient working capital exists) whilst the business is marketed for sale, or an immediate sale to an interested party who may or may not be connected to the company.

Sales that take place shortly after commencement of Administration are commonly referred to as Pre-Packaged Sales (PrePacks) and are often used in cases where the businesses goodwill is fragile and any cessation of trade or formal insolvency process would result in the end of the viable business and erosion of its goodwill to the mass detriment of the creditors and company employees. Preservation of the goodwill of the company is therefore paramount where it will result in the maximisation of realisations to the company’s body of creditors.

The company is therefore marketed discretely, where this is possible, before the commencement of the administration and a sale agreement to the highest and most appropriate bidder is drawn up to be completed shortly after commencement of the administration.

The company’s management, directors and or shareholders have – as key stakeholders – a vested interest in the business continuing as strongly as possible. It is often they who are prepared to pay the most for its goodwill and other assets as a going concern.

Employees are typically crucial to the success of the ongoing business and are transferred over into the new company. The net result is therefore better for the company creditors than if the company had either going into administration without a buyer in place, primed and ready to go or had been forced into liquidation.

The Administration can last initially for twelve months whilst the business or protected assets are marketed and sold. The company will usually then move into a company voluntary arrangement (CVA) or liquidation if funds are available to unsecured creditors. If not, then the company can move straight to dissolution by the Registrar of Companies.

Augusta Kent has considerable experience in rescuing businesses using administration and pre-pack administration. Please contact us if you would like to find out more.

This procedure is used by creditors who hold security over assets of a company. It enables them to regain the value of the debt owed.

It falls into two categories: fixed-charge receivership and administrative receivership. Administrative receivership involve the appointment of a licensed insolvency practitioner by a secured creditor (usually a bank).

A fixed-charge receiver (not necessarily an insolvency practitioner) is only appointed over the asset that the charge relates to, for example a mortgaged property and the receiver sells the mortgaged property in order to repay the secured creditor. The directors remain responsible at all times for the company’s affairs and its business.

An administrative receiver is appointed under a floating charge and can sell assets caught by both the fixed and floating charges of a debenture (to extend our example, with a mortgage, this would not only related to the mortgaged property but company stock, book debts, etc). The administrative receiver’s primary duty is to repay the secured creditor.

Although unsecured creditors must be notified the appointment of an administrative receiver, this officeholder does not agree or handle the repayment of their debts. Where residual funds are available, a liquidator will be appointed to do this.