What Insolvency options does my company have?
Insolvency, while often viewed as a last resort, can provide struggling businesses with a chance for a fresh start. There are several insolvency options available, each with their own implications and benefits.
Company Voluntary Arrangement (CVA)
A CVA is a formal agreement between a company and its creditors to repay debts over a specified period, usually three to five years. It allows the company to continue trading while restructuring its debts. CVAs can be a suitable option for businesses with a viable future but are struggling with existing debt obligations.
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- Pros: Allows the business to continue trading, protects against legal action from creditors, and offers a chance for recovery.
- Cons: Requires approval from creditors, may involve additional costs, and requires adhering to the agreed-upon repayment plan.
Administration
Administration is a process where a licensed insolvency practitioner takes control of the company’s affairs to assess its financial situation and formulate a strategy. The goal is to maximize returns for creditors, which may involve selling the business or its assets.
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- Pros: Protects the business from legal action during the process, can result in a more favourable outcome for creditors, and provides an opportunity for restructuring.
- Cons: Business operations may be disrupted, and there is no guarantee the company will survive the process.
Liquidation
Liquidation involves winding up the company’s affairs and selling its assets to repay creditors. There are two main types of liquidation in the UK: voluntary liquidation initiated by the directors or compulsory liquidation initiated by creditors.
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- Pros: Provides a clear and final resolution, frees directors from further liability, and allows creditors to receive their share of assets.
- Cons: The Company ceases to exist, and directors may face personal financial losses.
Pre-Pack Administration:
In a pre-pack administration, the business is sold to a third party before entering formal administration. This can be an attractive option for preserving the business and saving jobs.
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- Pros: Allows for a quick sale of the business, maintains continuity, and may result in better returns for creditors.
- Cons: Requires careful planning and may be perceived negatively by some stakeholders.
Contact us for free advice – Licensed Insolvency Practitioners
When a business is struggling financially, it’s crucial for owners to explore their insolvency options carefully. The choice between a Company Voluntary Arrangement, Administration, Liquidation, or a Pre-Pack Administration will depend on the specific circumstances of the business. Seeking professional advice from insolvency practitioners is highly recommended to ensure a well-informed decision.
Keywood Group is a licensed Insolvency Practice and our in house Insolvency Practitioner is regulated by the Insolvency Practitioners Association (IPA). While insolvency may seem daunting, it can offer struggling businesses a path to resolution and in some cases, a chance at a new beginning. By understanding the available options and their implications, business owners can make the best choice for their unique situation and work towards a brighter financial future.
Contact us today for a no obligation confidential consultation by calling us today on 0121 201 0399 or on 0208 912 0399. Alternatively you may wish to visit our offices based in Birmingham or London.
