Andrew Cawkwell discusses businesses in distress with Stray FM
At Newtons, our highly experienced insolvency and restructuring solicitors advise on administrations including the sale and purchase of businesses using the pre-pack administration procedure.
At Newtons, our highly experienced insolvency professionals and company restoration solicitors advise on a range of insolvency and restructuring matters.
Insolvency occurs when a company or individuals cannot repay their debts when they fall due, causing stress for both creditors and debtors, often with serious knock-on consequences. Our insolvency solicitors understand the time-sensitive and worrying nature of possible insolvency and are well-prepared to help you negotiate with creditors, deal with court proceedings and advise on action to either protect your business or get it closed down if this is unavoidable. At all times, we will advise you on your risk of personal liability and possible action against you such as director disqualification proceedings.
Our team has a strong reputation for delivering practical and focussed solutions for owners and directors of businesses facing financial difficulties. We advise on administrations, including the sale and purchase of businesses using the pre-pack administration procedure. We’re experienced working with a diverse range of businesses across Yorkshire, Teesside and County Durham.
Insolvency Solicitor Specialisms
We can help individuals and businesses with matters relating to:
- Administrations and Receiverships
- Company Voluntary Arrangements (CVA)
- Individual Voluntary Arrangements (IVA)
- Director disqualification
– Compulsory Liquidation (CL)
– Creditors Voluntary Liquidation (CVL)
– Members Voluntary Liquidation (MVL)
- Statutory Demand Process
- Winding up petitions
- Wrongful trading
- Business rescue and recovery, including ‘business turnaround’
- Company restorations
- Trust and property issues arising out of insolvency
- Director’s duties when a business is in financial difficulties
- Debt relief/forgiveness
Administration is a formal procedure which allows for the reorganisation of a company or the realisation of its assets under the protection of a statutory moratorium. This protection prevents creditors from taking action to enforce their claims against the company.
When a company enters administration, an insolvency practitioner is appointed as the company’s administrator. The administrator takes over the control of the company’s business and assets from the company’s directors to achieve one of the statutory purposes of administration, which are as follows:
- Rescuing the company as a going concern
- Achieving a better result for the company’s creditors
- Realising property to make a distribution to one or more secured or preferential creditors.
A receivership is commenced by a secured creditor who will receive assets of the company in order to repay borrowing. Receiverships are less common and there is now more of an emphasis on company rescue and saving struggling businesses.
Our insolvency solicitors can advise on all administration matters, including trading administrations and pre-pack administration. We will walk you through the process to ensure you understand your rights and the best steps to take for a favourable outcome.
The final event in a company’s life is it being struck off from the register at Companies House. Once this happens, the company is dissolved, loses its legal identity, and all its assets automatically transfer to the Crown as bona vacantia.
We regularly act for clients who need to make an application to the court to restore companies to the register at Companies House. Typically, this is because the company has been dissolved (for a variety of reasons) but there remain assets in the name of the company (typically money in a company bank account) that the business owners are unable to access.
The company might be struck off as a result of failing to file accounts or returns with Companies House or the company might have been struck off voluntarily under the mistaken belief that the directors would still be able to deal with the company assets.
Banks keep a record of Company Strike offs and you might find the company bank account being frozen. Any purported transfer of property belonging to a company after it has been struck off will be invalid. However, it is generally possible to restore a company to the register that has been struck off or dissolved. For the best chance of achieving this result, a specialist company restoration solicitor can advise you in a time- and cost-efficient manner.
If your company has been dissolved, wound up or struck off, one of our experienced company restoration solicitors can help you restore your company to the register at Companies House.
Company Voluntary Arrangements
A company voluntary arrangement (CVA) is a procedure that can assist a company in addressing its financial difficulties. It is a contract between a company and its creditors. Our insolvency specialists can offer you robust advice regarding a CVA contract to best protect your business.
A CVA is commenced under the supervision of an insolvency practitioner. The insolvency practitioner is known as the nominee before the CVA proposals are approved, and as the supervisor afterwards.
A CVA binds all unsecured creditors of a company if the requisite majority of creditors vote in favour of the proposals at properly convened meetings of creditors.
The CVA procedure is intended to allow companies to avoid the adverse consequences of Liquidation by coming to an informal, but binding, agreement or compromise with their unsecured creditors.
Typically, a proposal for a CVA will, fundamentally, include a rescheduling or reducing of the company’s debts.
Individual Voluntary Arrangements
An individual voluntary arrangement (IVA) is an option for individuals who cannot repay their debts. An IVA becomes legally binding between the debtor and all creditors provided that the IVA proposal is approved by 75% in value of all creditors. The proposal typically provides for repayments over a 5 year period with conditions to be met and should result in the creditors receiving more money that they would if the debtor became formally bankrupt.
Our insolvency solicitors can advise you on the IVA process, whether the IVA process is the best course of action for you, and how to protect your rights throughout the process. We can also negotiate and advise on the proposal’s specifics and ensure every step is taken to achieve the best possible result.
You can be served a disqualification order for directing a company in an ‘unfit’ manner. ‘Unfit’ behaviour includes being unable to pay the tax owed by the company and allowing a company to continue trading when it can’t pay its debts.
Under the Company Directors Disqualification Act 1986, a Court may make a disqualification order against a person to prevent them from acting as a company director in the future. A director’s disqualification also prevents an individual from indirectly directing a company, being concerned with or taking part in the company’s promotion, and forming or managing a company. This order can last for up to 15 years in the most serious of cases.
If you have had directors disqualification proceedings issued or threatened against you, one of our experts can advise you on the best way to proceed including a negotiated settlement and court representation.
Liquidation is a procedure through which the assets of a company are realised and distributed to creditors. Following the end of Liquidation, the company is dissolved.
There are three types of Liquidation – which are as follows:
- Compulsory Liquidation
A company can be placed into Liquidation by an Order of the Court following a petitioning creditor issuing a winding up petition against the company.
- Creditors Voluntary Liquidation (CVL)
This is the opportunity for shareholders and directors to decide to close the business and appoint a Liquidator on the basis that it is insolvent.
- Members Voluntary Liquidation (MVL)
Here the shareholders resolve to close the company for whatever reason, but it is still solvent and able to pay its debts and liabilities. A Liquidator is appointed to deal with the realisation and distribution of company assets, after all liabilities have been settled.
Whether you are considering voluntary Liquidation or are forced into the process, our specialist liquidation solicitors can advise on the right decisions to make for the best possible outcome.
Statutory Demand Process
A statutory demand is a written demand for debt payment in a format prescribed by law, served on either an individual or a company. A statutory demand does not need to be issued at Court.
The statutory demand process has the following potential advantages for creditors:
- It does not involve the Court from the outset (and is potentially cheaper).
- Preparing and serving a statutory demand is quick and (relatively) inexpensive.
- It can either result in prompt payment of a debt, or flush out details of any dispute or cross-claim.
If a Statutory Demand is not disputed, it can be relied upon as evidence of insolvency for the purpose of a winding up petition or bankruptcy petition. If you are owed at least £750 by one of your corporate debtors, £5,000 per one of your personal debtors, or you have been served with a statutory demand, please contact one of our experts to discuss your options. We can help you understand the statutory demand process and ensure the right steps are taken to protect your interests.
Winding Up Petition
A creditor of a company can apply to the Court to wind up a company if it can’t pay its debts as and when they fell due – such debt must be more than £750. A statutory demand can be relied on as proof that a company cannot pay its debts as they fall due.
A winding up petition is an extremely serious action and can have devastating consequences for a company that has had one presented against it if not dealt with properly. It could result in a company’s bank accounts being frozen or the company being wound up. If the debt is disputed then it is normal to pursue injunction proceedings to prevent the presentation or advertisement of the petition. Petitions should not be used as debt collection processes but they regularly are. Service of a Winding Up Petition certainly grabs people’s attention but they can be very expensive exercises if not handled properly.
Our insolvency specialists can help you choose the best course of action in relation to a winding up petition.
Under the Insolvency Act, an insolvency practitioner can seek a Court declaration for a director to personally contribute to the company’s assets by way of compensation. This can be done if they feel the individual who is (or was) director of the company, knew (or ought to have concluded) that there was no reasonable prospect that the company would avoid going into insolvency, but in spite of this continued to trade incurring further debts through the company.
This means it is vital for directors to demonstrate that they are aware of the state of company’s finances and trading position in order to justify the company staying in business. So, if you are being investigated for wrongful trading or worried about the risk, it’s recommended to seek the advice of an experienced insolvency solicitor to protect your personal financial position.
Bankruptcy is a stressful and unsettling time for any individual. You can either declare yourself bankrupt or, a creditor can apply to the court to make you bankrupt.
Before declaring yourself bankrupt, you should speak to a professional insolvency specialist who can offer you sound, comprehensive advice on whether it’s the right course of action for you. If you do decide to declare yourself bankrupt or are served with a bankruptcy petition by a creditor, our expert team will ensure you are fully supported from start to end and fully aware of your options.
If your business is facing financial hardship, you may benefit from external advice on restructuring in order to turn your business around and make it profitable.
Restructuring can be a complex process often due to employment and contractual obligations, , so it’s important to seek advice from an insolvency and restructuring solicitor. Our expert team are here to help you navigate this process while protecting yourself and your business.
A director has a legal duty to act in the interested of the shareholders, but if the company becomes insolvent, the duty switches requiring the directors to act in the best interests of the creditors. Failing to comply with your director’s duties can result in personal liability. As a result, it’s essential that, as a director, you maintain accurate and up-to-date books, records and financial correspondence.
If the business is at risk or facing an existential threat, it is important to obtain external advice early – often it is left to late which severely limits available options.
Our insolvency solicitors can help you to understand your director’s duties and how to comply with them if your company is facing insolvency.
Debt Relief / Forgiveness
If you cannot pay your debts, have debts under £20,000, assets under £1,000 and minimal disposable income, you can apply for a Debt Relief Order (DRO). Navigating such financial hardship can feel overwhelming and difficult, and our team understand that you want to move on quickly and carefully.
For comprehensive legal advice regarding the options available to you, your DRO application and the process from start to end, our expert solicitors are happy to assist.
If you are a creditor or debtor in need of robust insolvency advice, our team are here to help. Whether you’re seeking an insolvency solicitor, liquidation solicitor, company restoration solicitor or restructuring solicitor, our expert team will support you from start to end. Please contact us today to discuss your options further.