Insolvency

Administration is an arrangement designed to maintain a company as a going concern while plans are formed either to turn around the company, or to achieve a better outcome for the company's creditors than would likely be achieved if the company was to be liquidated (without first being under administration).

Pre-pack is an arrangement where the sale of all, or part of a company’s business or assets is negotiated with a purchaser prior to the appointment of an administrator, and the administrator effects the sale immediately on, or shortly after, appointment. This ensures lower trading risks and prevents erosion of the value of the business or assets.

A Receiver manager is appointed under a floating charge or debenture which covers the whole or substantially the whole of the company's assets. The primary mandate of a Receiver is to realize value for the repayment of debts owed to secured and preferential creditors of the insolvent company.

A Fixed Charge Receiver is appointed under a a specific/fixed charge over certain assets of a company. The appointment of the receiver and their powers are set out in the security documents and the deed of charge and, ordinarily, relate to securing and realizing value from the security to facilitate settlement of amounts owed to the secured lender(s) who hold a security interest in the assets.

A Company Voluntary Arrangement (CVA) is effectively a 'deal' between a company and all or a specific class of its creditors for compromising (i.e., providing for the terms of repaying in full or in part) the debts due from the company to the creditors.. It involves renegotiation by a company of the payments due to its creditors or some other form of financial restructuring. The aim of a CVA is to make the company’s repayment obligations more sustainable, taking into account the resources it has available, to enable the company to continue as a going concern.

Liquidations, primarily, involve the realization of the assets of a company to release value for distribution to stakeholders (usually, creditors for insolvent companies and shareholders for solvent companies) in line with the applicable statutory waterfall.

There are two main types of liquidation:

• Compulsory Liquidation (Liquidation by the court)

• Voluntary Liquidation

  • Members’ Voluntary Liquidation (MVL)

  • Creditors’ Voluntary Liquation (CVL)

Upon conclusion of the realization and distribution of assets, companies in liquidation are then struck off the register of companies and cease to exist.