Insolvency Advice for Businesses
Many businesses experience financial difficulties at some stage and, should a business’s debts become unmanageable, insolvency may be the only option. However, it is important to recognise you are not alone in this situation and that the earlier you take advice, the more options and control you will have over the outcome.
At IBB Law, we understand that most businesses prefer to avoid insolvency if possible. Where your business is at risk of insolvency, we can work closely with you and with third-party advisors to help you explore all of your options, including restructuring and rescue plans where viable.
Where insolvency cannot be avoided, we can guide you through options such as Company Voluntary Arrangements (CVAs), administration and liquidation, ensuring you meet your statutory obligations to your creditors and reduce the risk of misconduct claims.
Should you need to sell your business, part of your business or its assets, we can help you do so on favourable terms while keeping you legally protected.
Our team has provided insolvency advice for businesses ranging from start-up companies to large, established businesses, including UK and overseas private and public companies. As such, we can provide seasoned advice for even the most complex and high value insolvency matters.
We recognise that facing insolvency can be very stressful and confusing, but by offering clear, practical legal support, our insolvency solicitors can help you achieve the best possible outcome for you and your creditors.
Our expertise with corporate insolvency
At IBB Law, our Corporate & Commercial team are highly experienced in guiding businesses through insolvency. We understand that each situation us unique, so will take the time to understand your requirements and provide clear and pragmatic advice to match.
We can explain your legal position and options in plain English, identifying outcomes and processes that you may not have considered. At all times, we will make sure you meet your statutory duties, keeping you legally protected.
Our team has received independent recognition for our expertise, with leading legal directory Chambers & Partners describing IBB Law Partner Sarah Jackson’s approach as “no-nonsense, pragmatic advice, balancing the costs and the benefits.”
With strong expertise across the firm, we can call on other departments for tailored advice in connection with issues connected to insolvency, including those related to corporate finance, property, employment and taxation.
We also have established relationships with insolvency practitioners, banks and other professionals who support us (and who we support) in providing pragmatic advice for insolvency situations.
How our team can help insolvent businesses
Where your company has become insolvent, you can apply for a Company Voluntary Arrangement (CVA) allowing you to pay your creditors over an agreed period. This can allow your company to continue trading, but only if 75% of your creditors by value agree to the 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 majority of creditors vote in favour of the proposals at properly convened meetings of creditors and shareholders of the company, the proposals are binding on the creditors and the company. 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.
We can assist with:
- Advice on the suitability of a CVA for your business
- Negotiating the terms of a CVA with the insolvency practitioner, company stakeholders & creditors
- Ensuring the CVA complies with your corporate governance obligations
- Advice on alternatives to CVAs, such as pre-package sales
Internal re-organisation of a business and/or corporate structure can allow you to modify your company’s capital structure and/or operations to make the business more efficient or commercially viable.
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 is likely to become insolvent.
Our Corporate team can assist with all aspects of corporate restructuring, including:
- Advice on different corporate structures and their advantages
- Any potential pitfalls of restructuring and how to mitigate these
- Preparing the necessary legal documentation for your restructure
- Updating records with Companies House, finance providers & other relevant parties
- Ensuring compliance with all relevant laws and regulations
Find out more about how we help businesses with corporate restructuring & demergers.
A company may be put into administration by a court order sometimes following an application by the creditors, or an out of court procedure available to the company, its directors, or the holder of a qualifying floating charge. The aim of an administration is to achieve a better result than a liquidation, ideally to save a business where possible or, where the company cannot be saved, for it and/or its assets to sold to meet the business’s debt obligations.
Once a 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.
Our Corporate Restructuring & Insolvency team can assist companies entering administration with matters including:
- Appointing administrators
- Pre & post sale restructuring
- Asset sales
- Defending claims against directors
Often 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. Following the introduction of the Corporate Insolvency & Governance Act 2020, this is more difficult as the Court will not order a compulsory liquidation where it is a consequence of Coronavirus. This will last until September 2020 and may be extended.
A voluntary liquidation is instigated voluntarily by the directors of the company. A members’ voluntary liquidation can be used as a tax efficient method of distributing a solvent company’s assets to its members. Unlike the administration procedure, liquidation always results in the dissolution of the company.
Our Corporate team can assist with matters including:
- Defending statutory demands/winding up petitions
- Applying for a Validation Order to allow your business to continue trading
- Defending Directors against claims from office holders
- Issuing statutory demands/winding up petitions
- Advising on voluntary liquidations solvent or insolvent
If you are selling all of part of your business in response to an insolvency situation, it is important to tread carefully to ensure you meet your legal obligations. You must act in a way that protects the interests of your creditors and ensure you receive a fair value for the business or its assets. It is imperative that you seek professional advice in this situation and we would usually work with licensed insolvency practitioners to protect directors and members’ interests.
Where a company has entered administration, it will be the administrator’s decision and responsibility to sell the business or its assets. Should a company go into liquidation, the business can no longer be sold as a single entity and only its assets can be sold.
Where an insolvent business or its assets need to be sold, our team often act for insolvency practitioners or buyers to help you through this process.
Find out more about how we can assist with business sales.
Speak to our business insolvency solicitors
Where your business has become insolvent, our expert team are here to offer clear, practical advice on the steps you need to take to meet your legal obligations and save your company where possible.