Administration is a formal Insolvency procedure which is governed by statute, often referred to as a rescue strategy. It provides breathing space for a Company while it seeks advice to identify if the Company or part of the business can be rescued.

It is commonly used to protect all of the Companies creditors and assets when there is one creditor who is about to take serious and detrimental action against the Company.

An Administrator (who must be a licensed insolvency Practitioner) is appointed to manage the affairs, business and property of the Company.

Administration is a temporary procedure. The Company, after Administration must then exit this procedure by the most appropriate route which may mean a full recovery, a business sale or orderly shut down.

Of all the Insolvency procedures in the UK this is by far the most commonly used. The Association of Business Recovery Professionals “R3” statistics state that 80% of insolvencies in England & Wales use this process.

Liquidation is a terminal procedure and the result is that the Company in Liquidation is brought to an end and ultimately dissolved. Prior to dissolution the appointed Liquidator will sell Company assets and enhance realisations to make a payment to creditors of the Company.

As the name suggests, this is a voluntary procedure initiated by the directors of the company who have usually sought the advice of their accountant which is then verified by an Insolvency advisor.

The main advantage of a Creditors Voluntary Liquidation is that the decision is made by the directors to start the process. The Company is put into Liquidation voluntarily by its members / shareholders after a meeting of Directors which resolves to start this process. There is some credit to be attributed to the directors of the Company for taking, what can be difficult action, to protect the Company and its creditors.

A CVA is a formal insolvency procedure and is classed as a rescue process, however it is an extremely flexible option which is tailored to suit a realistic and affordable proposition by the Company. This option usually involves a degree of debt forgiveness by the Companies creditors who accept a dividend payment in full and final settlement of the total debt due.

Essentially a document ( proposal ) is drafted which sets out how debts owed by a Company are going to be repaid. The document is presented to the Companies creditors who vote whether to accept it or not. Creditors can reject the proposal or suggest modifications.

The real highlight of a CVA is that each one is different and unique to every Company and its particular circumstances.

If a CVA is accepted this usually means that the Company has a chance to survive and can continue to trade.

A Pre Pack Administration is a form of Administration as referred to earlier which means it is a rescue procedure available for Companies. The sale of the Companies business and or assets is usually negotiated and effected immediately upon the Appointment of the Administrator or very soon after.

This insolvency option, if the circumstances are right, can be a very useful and effective tool producing the best outcome for all parties involved with the Company.

This “insolvency” procedure is actually used for solvent Companies and is actually a great place to be for a Company as it means your Company is solvent, and can pay or has already paid all of its creditors.

The procedure is still carried out by an Insolvency Practitioner, however, unlike a Creditors Voluntary Liquidation does not have any creditor involvement but, instead is driven by the Directors and shareholders of the Company.

Because this is a form of Liquidation it is still the end of the Companies “life” however it is a great way to extract funds out of a Company and subject to meeting certain criteria the shareholders may qualify for entrepreneurs relief and only pay 10% tax on the monies they receive.

Ivan Mckenzie is the head of the Members Voluntary Liquidation Department here at Rushtons and has a wealth of experience in dealing with this type of work, Ivan would be more than happy to discuss the procedure in further detail with you. To get in touch, see our people for more info.

This is a formal insolvency procedure, not often entered into by choice. It will be of no surprise that HMRC are the biggest petitioners of Companies in the country, however even if your Company has received a winding up petition from HMRC there are still steps the Directors and Company can take to prevent further action.

When a Company is put into Compulsory Liquidation, the Official Receiver is appointed who will deal with the Company. In certain circumstances an external or private Liquidator may be appointed to realise Company assets with a view to making a dividend distribution to creditors.