Corporate Rescue Options

Administration

An Administration is a process whereby an Insolvency Practitioner is appointed as the Administrator of an insolvent company, and in many cases the Directors themselves can instigate this, allowing a company, under pressure from its creditors, to relieve that pressure as the administration process provides protection by law from its creditors in the form of a moratorium, and will allow time in which to consider the options.

The aim of an Administration must be either to rescue the company as a going concern, provide a better outcome to creditors than the Company being wound up (without first being in Administration), or to provide a distribution to the secured and/or preferential creditors.

Once appointed, an administrator, who is classed as an officer of the Court, effectively takes over the running of the company and can continue to trade if he/she believes that it is in the best interests of the company to do so.  The administrator will contact all creditors and set out his/her proposals for achieving the purpose of the administration as soon as reasonably practicable after the company enters administration, and in any event within 8 weeks of the company entering administration.

An administration order will last for 12 months, however the administration can be ended sooner or extended, with the correct consents, beyond 12 months for a specified period.

Where stringent tests can be met, some administrations are in the form of a ‘PrePack’.  More information about these is provided below.

It should also be noted that an administrator is required to investigate the company’s financial affairs and submit an assessment of the directors conduct to the Secretary of State within three months of the Administration Order.

Live Recoveries offers a full range of solutions, including administration, drawing on the team’s knowledge and experience. We strive to provide information about all relevant options available in the easiest of formats in order that informed decisions can be made by you.

Administration – Pre-Packaged

An Administration is a process whereby an Insolvency Practitioner is appointed as the Administrator of an insolvent company and in many cases the Directors themselves can instigate this. The aim of an Administration must be either to rescue the company as a going concern, provide a better outcome to creditors than the Company being wound up (without first being in Administration) or to provide a distribution to the secured and/or preferential creditors.

A pre-packaged Administration is in law no different to any other Administration. However, a pre-packaged Administration allows for the negotiation of a sale of the whole or part of a business prior to the appointment of an Administrator, with a view to him executing such a sale shortly after the appointment. Thus the business (not the Company) survives the insolvency process and continues to trade.

A pre-packaged Administration requires significant additional reporting by the Administrator upon his appointment in order to provide specific justification and explanation for the use of the procedure, however when a pre-packaged Administration is utilised correctly, crucially this can provide the best financial outcome for creditors.

The team at Live Recoveries has considerable knowledge and experience of pre-packaged administrations and can provide you with the relevant information you require and considerations that need to be made prior to instigating such a process.

It must be stressed that this is a brief overview of an Administration and is not intended to allow a director to self-diagnose. It is recommended that if you are under threat or considering entering into administration, you contact us for a free consultation to ensure that you take the appropriate action.

Company Voluntary Arrangement

A Company Voluntary Arrangement (“CVA”) is a process whereby an Insolvency Practitioner is firstly appointed by the Directors of a company as a ‘Nominee’ to assist in providing a Proposal to the company’s creditors to compromise their claims, whereby the Company can either continue to trade, or alternatively its affairs can be concluded in a controlled manner.  In each case the aim is provide a better financial outcome for all parties than other insolvency procedures available.

This involves the preparation of a Proposal, estimated outcome statement, relevant filing requirements and the convening of the relevant decision procedures by which a proposal is to be considered and approved by the creditors and members of the Company.  Following approval of a proposal, an Insolvency Practitioner is appointed as a ‘Supervisor’ of that Arrangement in order to ensure that a company delivers its part of the arrangement.  Frequently this commitment continues over a number of years, in most cases between 3 and 5 years, therefore a CVA may not be suitable if the Directors are in poor health or wish to retire imminently.

The CVA process is where a company is able to make the sufficient operational amendments required in order to provide assurances for the ongoing trade of a business.  Contributions are then made from future cash flow surplus to the Supervisor to provide for an agreed percentage of liabilities at the date of a proposal being approved being satisfied over the Arrangement period.

A CVA can be the most appropriate process where a company has procured contracts that would otherwise be lost, and uniquely amongst the statutory company insolvency processes, the day to day management of the company remains in control of the continuing business.

The team at Live Recoveries has supervised a number of successful Arrangements and are here to provide the advice and information required in order to enable Directors to make an informed decision on the feasibility of such a process.