Q. Who are Absolute Recovery?
A. We are established Insolvency Practitioners who are specialise in business rescue and recovery, we are an experienced team ready to help you sort out the best options for you and your business.
Q. What are the free options available to me?
A. We will give you a free overview of your business and the options available to you depending on your circumstances. This free advice will be available immediately.
Q. What does it mean to be insolvent?
A. A company or individual is said to be insolvent if they are unable to pay their debts as and when they fall due.What is a CVA and what does it stand for?This stands for Company Voluntary Arrangement (CVA), a procedure under which an insolvent company can set up a repayment plan with its creditors. Under this repayment plan, creditors agree to accept a certain sum of money in settlement of debts due.
Q. What does Administration involve?
A. Administration is a formal protection procedure where the company is placed under the control of an Insolvency Practitioner and the protection of the Court with the aims of either rescuing the company as a going concern, or achieving a better result for the creditors than would be likely if the company were simply to be wound up.
Whilst a company is in Administration, creditors cannot take any actions against it except with the permission of the court or the Administrator.What is a Receivership and what is the Administrative Receiver?A Receiver is appointed by a debenture holder, normally a bank, to realise assets caught under its charge. A Receiver appointed over most or all of a companies assets becomes an Administrative Receiver. A Receiver or Administrative Receiver's primary duties are to his appointer whereas an administrator has a duty to act in the interests of the creditors.
Q. What does Liquidation mean?
A. Often referred to as ‘winding up', it is the most common corporate insolvency procedure. A liquidator is appointed to realise the company's assets and distribute the proceeds in a prescribed order of priority. Liquidation signals the cessation of a company's activities and its eventual removal from the Companies Register. Liquidation can follow either a receivership or an administration.
Q. Are there different types of Liquidation?
A. Creditors Voluntary Liquidation (CVL) The most common liquidation procedure whereby shareholders, usually at the directors' request, pass a resolution to place a company into liquidation because it is insolvent. The process is driven by the directors. An independent insolvency practitioner is appointed to act as liquidator by the directors and shareholders and creditors are invited to a meeting to agree the appointment or to nominate an alternative liquidator. Compulsory Liquidation Compulsory liquidation (or compulsory winding up) Is instituted by an order made by the court, usually on the petition of a creditor, the company, or a shareholder. There are a number of possible reasons for making a winding-up order. The most common is because the company is insolvent. Members Voluntary Liquidation (MVL) This is a solvent liquidation, in which a liquidator is appointed by the shareholders and the company's assets are sufficient to settle all debts, costs and liabilities within twelve months.
Q. As I am seeing an Insolvency Practitioner, is it necessarily the end of the road for my business?
A. No, we are a business recovery and rescue practice and our Corporate Strategies division specialises in helping companies in financial difficulties. Corporate Strategies will provide you with a concrete plan to help move your business forward. If, of course, you come and see us early enough.
Q. Ok I have made contact with you, how quickly can you see me?
A. Within 24 hours if need be!
Q. I need help understanding all the jargon
Q. Where can I find Creditors' Guides to fees on your website?
A. Please click here for a list of guides
Q. What should I do before the company is wound-up?
A. You should take advice from an Insolvency Practitioner prior to the winding-up-hearing as a compulsory liquidation may not be solution to the company's problems.
Q. Who would be appointed liquidator of the company?
A. The order would be made at Court and the Official Receiver would be appointed as liquidator of the company.
The Official Receiver may act as liquidator for the duration of the procedure if the case is relatively straight forward. However, they will seek the appointment of a private sector Insolvency Practitioner should there be more complex issues involved.
Q. Will there be any meetings?
A. The Official Receiver would generally request that the director attend a meeting at their office in order to gain information and records with respect to the company.
If the Official Receiver feels it is appropriate, he may summon a creditors meeting for the purpose of establishing a committee and/or appointing a private sector Insolvency Practitioner to act as liquidator.
Q. Will the Liquidation be advertised?
A. It would be advertised in the London Gazette.
Q. What are the consequences of a winding-up order?
A. Any disposition after the presentation of the petition is void unless consent is received from Court.
After the liquidation has commenced, any legal action that has already commenced against the company is stayed (frozen), unless court gives permission for it to continue.
No new legal proceedings can be brought against the company, without leave of court.
The powers of the directors cease.
Q. What will the bank's reaction be to the issuing of a winding-up-petition?
A. The bank would freeze the bank account as soon as they became aware of the winding-up-petition. However, it could allow receipts to be made into a suspense account.
If the bank has security over any assets, then it could take the decision to appoint an administrative receiver or administrator. However, they will only do this if the amounts are material.
If an individual has personally guaranteed the bank's indebtedness, it could contact them to demand payment. This usually occurs once a Liquidator has been appointed and the bank has more information on which to assess its financial position.
Q. What will happen to the employees?
A. Any employees at the date of the winding - up-order would be dismissed. They would be entitled to claim monies due to them from the Redundancy Payments Office. Once the appropriate forms have been submitted to the liquidator these are sent to the appropriate Redundancy Payments Office and a claim is made from the National Insurance Fund.
Q. What are the Liquidator's duties?
A. The liquidator has the task of realising (selling) all the assets at market value and the proceeds deposited in a designated trust account.
The liquidator will consider the claims of the creditors and following the deduction of fees, payment will be made on the agreed claims in the order of priority.
The liquidator will ensure that all contracts or disputes are completed or brought to a conclusion.
Q. Can the directors or associates of the company purchase the assets from the liquidator?
A. The liquidator's duty is to sell the assets for the highest possible price. There is therefore nothing to prevent the directors submitting an offer for the assets of the company and, if the offer is accepted, purchasing them. If this is the directors' intention, then it must be disclosed at the meeting of creditors and in future reports.
Q. Can the directors of the liquidated company become directors of another company?
A. Your right to be a director or hold a position of trust is not eroded when a company in which you have held a position of trust goes into liquidation. However, this right disappears if you are disqualified from being a director or are made bankrupt.
Q. What action could lead to the disqualification of the directors?
A. trading whilst knowing that the company was insolvent;
paying certain creditors in preference to others. This can include paying monies into the bank account to eradicate an unsecured overdraft;
taking deposits knowing that there was no chance of fulfilling the order;
incorporating a phoenix company and utilising the same or similar name to that of the liquidated company;
placing assets out of the reach of creditors;
allowing transactions at an undervalue (i.e. selling assets at a value which is lower than that which could be achieved on the market);
not maintaining adequate books and records; and
not filing accounts.
Q. Will I be personally liable for the company's debts?
A. When a company is limited, the assets and liabilities belong to the company and the directors are deemed to be officers of that company.
However the director may be personally liable if they have provided a guarantee for any of the company's liabilities or contracts. In addition to this if there has been a breach of the insolvency legislation the directors could be pursued
Q. What is the difference between a voluntary and a compulsory liquidation?
A. A voluntary liquidation, which can be either a members' voluntary liquidation or a creditors' voluntary liquidation, is brought about by resolution of the company and is conducted by a qualified practitioner. A compulsory liquidation is brought about by an order of the court and can be conducted by the Official Receiver or a qualified practitioner.
Q. Do the people in charge of insolvency proceedings hold any kind of qualification?
A. Anyone undertaking the duties of liquidator, administrative receiver, administrator or supervisor of a corporate voluntary arrangement must be a qualified insolvency practitioner. Those holding the position of receiver or manager do not need this qualification, nor does anyone who was already in office before the Insolvency Act 1986 (for England, Wales and Scotland) or the Insolvency (Northern Ireland) Order 1989 (for Northern Ireland) was implemented.
Q. Who can propose a CVA?
A. The directors of the company are usually the main instigators of a CVA.
Q. What information is required for a CVA to be considered?
A. The directors would have to provide a general history of the company, identify what went wrong and indicate how this situation is going to change.
Detailed financial information must be provided to allow the preparation of cash flow and profit and loss forecasts.
The Insolvency Practitioner should be informed of any history of insolvency in respect of the directors and any legal action commenced in relation to the company.
Q. How can you tell if a CVA is viable?
A. For a CVA to work, the following are essential:
the company must return to profitability;
the reasons for the company's problems must be identified and rectified;
the acceptance of the change must be adopted by management;
capital injections could be proposed and these would have to be obtained;
all VAT and Tax returns must be submitted; and
the level of the CVA contributions together with the future liabilities that will be incurred following the approval of the CVA must be affordable.
Q. How does the voting work?
A. Of the total value of votes received from creditors either in person or by proxy 75% must approve the CVA or it will be rejected.
Q. How would the bank be affected?
A. A. The bank is usually a secured creditor and would therefore not be legally bound by the CVA. However their co-operation would be required, as the majority of companies rely on having the use of an overdraft facility.
The bank would usually prefer that the overdraft is reduced over time.
Q. How will H M Revenue and Customs be affected?
A. H M Revenue and Customs (formerly Inland Revenue and H M Customs and Excise) have a specialised centralised department who consider all CVA proposals. Absolute Recovery ensures that their usual standard conditions are included in the CVA proposal.
If tax and VAT returns are not up to date and/or there has been a breakdown in the relationship between the company and H M Revenue and Customs, the proposal will have a significantly lower chance of being accepted.
Q. What happens if the company's circumstances change and amendments need to be made to the terms of the CVA?
A. With the acceptance of the creditors a variation can be made to the terms of the proposal at any time.
The same voting applies as for the acceptance of the Arrangement i.e. of the total value of voting creditors, 75% must accept the variation.
Q. Can a CVA provide protection from executions or distraint action?
A. Yes for companies with no more than 50 employees and with turnover under £2.8M per annum. It is now possible to seek protection from creditors using the new CVA procedure that includes a moratorium.
Under the new procedure a 28 day moratorium automatically commences on the filing at Court of certain documents. There is no requirement for a court order. The 28 day period can be extended up to two months but the existence of the moratorium does have to be advertised. The moratorium prevents action by a landlord or secured creditors against the company's property and assets and prevents any other legal process including another insolvency procedure from commencing or continuing.
Q. What happens if some creditors don't vote?
A. Once approved the terms of the CVA are binding on all creditors who would have been entitled to vote at the meeting of creditors even if creditors did not get notice of the meeting. Thus the unknown creditors are bound by the arrangement.
Q. Someone told me that if we do a CVA the company has to pay back 100p in the £1 or the tax people will reject the proposal is that correct?
A. NO! The amount the company pays back should always be based upon affordability not some arbitrary number. We always work out a 5 year programme with supporting and highly detailed forecasts. Then the result is a better structured longer lasting CVA.
The Revenue and VAT people will be happier to support that plan than a half baked scheme that takes the total unsecured and tax debt and divides it by 24 months – to get a simple 100% repayment. This method is doomed to failure!
Under the law there is NO minimum payment or dividend as it is known, the law simply lays out a method for offering a deal to the company’s creditors.
Q. If we propose a CVA what will HMRC do?
A. The HMRC has a duty to consider the deal and the normal process is for the Insolvency practitioner to call HMRC and say a CVA is being prepared. The collector or debt recovery unit will then pass the file to the voluntary arrangement service in Worthing. They will consider the document very carefully and vote accordingly. They will not (usually) collect any tax and NIC between notification and the creditors meeting.
Q. Who can propose a CVA?
A. A CVA may be proposed by the directors of the company. When the company is either in liquidation or administration, the liquidator or administrator can propose a CVA. A CVA can only be proposed if a company is insolvent or contingently insolvent.