An at-a-glance guide to insolvency processes
If you or your client’s business is facing financial distress it can be a stressful and worrying time for all involved. It can also be daunting to be presented with an overload of information and options on what to do next.
Perhaps a formal insolvency process is the appropriate course of action, but you’re uncertain about the available options or the next steps to take?
At Bretts we are able to comprehensively assess your business’s situation and provide you with proven, practical solutions tailored to your specific needs. Our expertise lies in identifying and recommending the most suitable strategies, whether it’s implementing a turnaround plan or pursuing a formal insolvency procedure.
With our guidance, you can regain control over your business’s financial affairs and find peace of mind, knowing that you’re taking the right steps towards a brighter future.
Below, you can find an overview of the range of formal insolvency processes available to businesses in the UK, which we hope will provide a helpful summary. For more in-depth information on each option, please click through to the relevant page on our website or get in touch.
- Administration: This is a rescue procedure that provides a company with breathing space from creditors while attempts are made to rescue the business as a going concern. An insolvency practitioner (IP) is appointed as the administrator to manage the company’s affairs and assets.
- Creditors’ Voluntary Liquidation (CVL): This is a voluntary liquidation process initiated by the company’s directors when the company is insolvent. An IP is appointed as the liquidator to wind up the company’s affairs and distribute the assets to creditors.
- Compulsory Liquidation: This is a court-based process initiated by creditors when a company is unable to pay its debts. The court appoints an official receiver initially, and then an IP as the liquidator to wind up the company’s affairs.
- Company Voluntary Arrangement (CVA): This is a statutory procedure that allows a company to agree on a proposal with its unsecured creditors to repay all or part of its debts over an agreed period of time. An IP is appointed to supervise the arrangement.
- Restructuring Plan: This is a court-approved agreement between a company and its creditors or members to restructure its debts or reorganize its share capital. It requires approval from creditors or members representing at least 75% of the value of claims or shares.
- Moratorium: The moratorium is a director led process which leaves the directors in situ to trade the company with an insolvency practitioner acting in the role of “monitor” overseeing the company’s affairs. The aim is to afford companies some breathing space from creditor action to formulate a turnaround plan without adding significant costs. The monitor must be confident that a rescue of the company will be possible.
- Members’ Voluntary Liquidation (MVL): This is a liquidation process for a solvent company initiated by the company’s shareholders when the company is solvent but no longer required. An IP is appointed as the liquidator to wind up the company’s affairs and distribute the reserves to shareholders. There can be significant tax advantages for the shareholders in using this process.