A multitude of reasons can be behind a period of poor business performance, and likewise there are a number of possible solutions. In the worst cases, the company may have no option but to close its doors for good. Alternatively, there are a range of rescue and recovery processes to help turn a company’s fortunes around, so long as there is a viable business there to save.
With access to over 60 licensed Insolvency Practitioners across the UK, Real Business Finance can assist you in seeking timely and transparent advice tailored to your situation and aim to keep you out of formal insolvency proceedings. They will assess the available options which could include one of the following:
- Creditors’ Voluntary Liquidation (CVL) – The most common formal insolvency procedure, a CVL is a process which brings about the end of an insolvent company. Initiated by the company’s directors and/or shareholders, a CVL must be administered by a licensed insolvency practitioner who liquidates the company’s assets for the benefit of creditors. Any debt remaining after the proceeds have been distributed accordingly will be written off (unless these have been personally guaranteed). As a CVL is instigated by the company itself; the company retains an element of control over the process while also ensuring they are acting in the best interests of creditors.
- Compulsory Liquidation – The process of compulsory liquidation is similar to that involved in a CVL; however, the main difference lies in how the process is initiated. Compulsory liquidation occurs when a creditor petitions the court to forcibly wind up a company. This is done by the issuing of a winding up petition (WUP), which, if not dealt with, will lead to a winding up order. While there are steps that can be taken to save a company after the issuing of a WUP, as long as it is acted upon quickly, once a winding up order has been granted, there is nothing that can be done and the company will be forcibly liquidated.
- Administration – In the majority of cases, rescuing the company as a going concern will be the ultimate aim of an administration, although in some terminal situations an administration may be preferable to liquidation should it be determined that this course of action would allow for better creditor returns. A company must eventually exit administration. This could be through continuing trade, a sale to either a connected or unconnected party, entry into an alternative insolvency procedure, or sometimes liquidation should rescue not be possible.
- Company Voluntary Agreement (CVA) – In simple terms, a CVA is a formal arrangement entered into by a company and its creditors which allows outstanding liabilities to be cleared in a more affordable manner. Existing contracts, including commercial leases, may also be renegotiated and in some instances a portion of outstanding debts may be written off. The ultimate aim of a CVA is to save the business, allowing trade to continue and jobs to be preserved.
- Members’ Voluntary Liquidation (MVL) – A liquidation process designed for solvent companies. It can be used to secure an orderly winding up of a company or to close down a subsidiary that is no longer required within a group of companies. The reasons can vary for closing down a business from a tax efficient exit strategy. Director retirement or to reorganising a group of companies.