Definitions A company is insolvent if either it does not have sufficient assets to cover its liabilities OR it is unable to pay its debts as they fall due.
An individual is insolvent if he/she is unable to pay his/her debts as they fall due.
corporate insolvency Company Voluntary Arrangement (CVA)
A proposal is put to creditors and shareholders for the repayment of some or all of a company's debts over an agreed period of time.
Often allows the company to continue to trade; alternatively allows more orderly cessation of business than in Liquidation.
Must be approved by 75% of creditors (by value); if approved binds all creditors with notice of it.
Rights of secured creditors (banks/building societies etc with a charge or debenture) largely unaffected.
Administration Administrator appointed by the Court through a petition by the company.
Secured creditors with a debenture must first be given the opportunity to appoint an Administrative Receiver (see below).
Administration order prevents any legal action being commenced/continued against the company.
Administrator runs company, and decides best way to deal with its insolvency, usually through a CVA, a sale as a going concern or Liquidation.
Administrative Receivership Administrative Receivers appointed usually by bank or other lending institution with a debenture (floating charge) over the assets of the company.
Similar powers to an Administrator - can continue to operate business and sell as a going concern.
Cannot deal with claims of unsecured creditors (with no charge or debenture), these are usually dealt with by subsequent Liquidation.
Liquidation Usually the end of the road for the company.
Can be solvent (Members Voluntary Liquidation - "MVL") or insolvent (either Compulsory Liquidation through the Court or Creditors' Voluntary Liquidation - "CVL").
MVL - Liquidator distributes assets amongst the shareholders ("members").
CVL - shareholders/directors agree to place company in voluntary liquidation. Compulsory Liquidation - instituted by petition to the Court, usually by a creditor owed more than £750, followed by a winding up order. The Liquidator realises the assets of the company and distributes any surplus monies raised by dividend to creditors.
Complete form online:
Winding Up Form
