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Corporate Restructuring and Insolvency

Corporate Restructuring and Insolvency

Due to the currently volatile market, most businesses experience financial difficulties at some point or the other. Some manage to fight through this, however for the less fortunate, there are various options available to help ease your burden and stress. Our corporate team is well equipped to deal with all types of restructures, irrespective of the value and complexities involved, advising both shareholders and directors of the impact the changes will have.

Our corporate specialists will endeavour to develop a legal strategy to manage risk and arrange new sources of finance to save all or part of your business or assist with dissolving the business, if that is required. The corporate team has extensive links with insolvency practitioners, banks and relevant professionals who support us (and who we support) in providing pragmatic advice.

The form of restructuring or recovery is determined by the economic and financial circumstances of the business.

Some of the options available are:

Restructuring

This is simply an internal re-organisation of the business and/or corporate structure. Some forms of restructuring include:

  • Reduction or division of share capital of a company;
  • Re-arrangement of companies within a group of companies;
  • De-merger of a business.

Companies restructure for a number of reasons which include tax efficiency, increased commercial efficiency or the purchase of a company that is facing financial problems and/or likely to become insolvent.

Administration

This is a procedure where a company may be reorganised or its assets realised under the protection of a statutory moratorium. A company may be put into administration by a court order or an out of court procedure available to the company itself, its directors or the holder of a qualifying floating charge. Once the company is put into administration, an administrator is appointed who then conducts the affairs of the company and takes over its management. At the point that the company enters into administration, it has the protection of a moratorium which prohibits creditors from instigating or continuing with a legal process against the company without the consent of the administrator or the permission of the Court. The main hope with an administration is that, at the end of the process, the business has hopefully survived and the company has been rescued or the business and/or the company's assets have been sold by the administrator.

Liquidation

Also referred to as 'winding up'. This is an insolvency procedure under which the assets of a company are realised and distributed to creditors by the appointed liquidator as prescribed by legislation. Liquidation can be compulsory or voluntary. Compulsory liquidation is instigated by a creditor and following a Court order, the liquidation commences. A voluntary liquidation is instigated voluntarily by the members or creditors of the company. Unlike the administration procedure, liquidation always results in the dissolution of the company.

Company Voluntary Arrangement (also referred to as CVA)

This process requires that an insolvency practitioner is appointed. Once commenced, a compromise or other arrangement with creditors is implemented under the supervision of the appointed insolvency practitioner (as the nominee before the proposals are implemented, who then becomes known as the supervisor). If the relevant majorities vote in favour of the proposals at properly convened meetings of creditors and shareholders of the company, the proposals are binding on the creditors. However, the arrangement does not affect the rights of secured or preferential creditors (those creditors whose claims rank in priority to other unsecured creditors and floating charge holders which include certain employee claims and contributions to pension schemes), unless they agree to the proposals. The additional benefit for small companies is that they have the option to exercise a moratorium before any CVA is put into place.

Regardless of the type of restructuring or insolvency procedure adopted, should you decide to have our corporate team on your side you will be confident that the requisite restructuring or insolvency procedure has been executed correctly and in compliance with all the laws and all post-completion filing and notification tasks will be completed to ensure that all the documents for the relevant procedure selected are in order.

To talk to one of our corporate solicitors, call us today in confidence on 01895 207264. Alternatively, you can email us at corporate@ibblaw.co.uk. Alternatively please click here for more information.