Here are the top ten things you need to know about company insolvency…
- Insolvency is when a company is unable to pay its debts as they become due.
- There are several types of insolvency proceedings in the UK, including liquidation, administration, and company voluntary arrangement (‘CVA’).
- Liquidation is the process of winding up a company’s affairs and selling off its assets to pay off creditors.
- Administration is a court-supervised process in which an administrator is appointed to try to rescue the company or achieve a better outcome for creditors than liquidation would.
- A CVA is a formal agreement between a company and its creditors to pay all, or part, of its debts over an extended period of time.
- The Insolvency Service, an executive agency of the UK government, is responsible for taking action to have directors of insolvent companies disqualified where there is significant misconduct.
- A Director of an insolvent company can be held personally liable for wrongful trading and other transactions undertaken by their company which harm the creditors.
- The transactions made by a company prior to its insolvency which can be challenged and set aside include preferences and transactions at an undervalue.
- Creditor’s voluntary liquidation (CVL) and Members’ voluntary liquidation (MVL) are two types of voluntary liquidations, the first being insolvency, the second being a solvent liquidation.
- The Official Receiver is responsible for the liquidation of companies that are in compulsory liquidation. In all other cases, the person dealing with the insolvency is a commercial ‘licensed insolvency practitioner’.