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Corporate Recovery

Pearson Hinchliffe Commercial Law offers a comprehensive legal and financial Corporate Recovery and Insolvency service to help businesses in financial difficulty.  The service can also easily be expanded to advise stakeholders on their personal financial and legal positions. 

Increasingly companies are struggling to survive the financial difficulties of the current economic climate and are in need of solid, experienced assistance. These troubles could be as a result of a bad debt, reduced sales or maybe an increase in creditor pressure as all companies seek to improve their cash positions.  There are various opportunities available to resolve a company’s insolvent situation be it, the formal insolvency procedures listed below or one of the other less onerous options, which would facilitate the company trading out of its current difficulties.

FORMAL INSOLVENCY PROCEDURES

Voluntary Liquidation

Voluntary Liquidation is where the directors of a company, take the difficult decision following comprehensive insolvency advice, to instruct a Licensed Insolvency Practitioner to liquidate the company. The liquidator is tasked with realising the company’s assets for the best price, and then making the necessary distributions to creditors. This is a well trodden path in dealing with insolvent companies, and is a terminal scenario where the employees are dismissed and the company ceased to trade.

In certain circumstances it may be appropriate for the directors of the company to buy the assets back from the liquidator. This is known as Pheonixing, and allows a new company to be established, which can immediately start to trade without the creditor baggage of the previous insolvent company. The liquidator will ensure that the best price is obtained for the assets and will obtain professional valuations as appropriate.

In a Compulsory Liquidation scenario a creditor issues a petition through the Court to have the company wound up, and the directors are forced down the route of liquidation if deemed fit by the court. It is generally considered preferable for company directors to go down the route of a creditor's voluntary arrangement rather than a compulsory liquidation.

Company Voluntary Arrangements

The corporate version of an IVA is the CVA - Corporate Voluntary Arrangement - which normally facilitates the restructuring of the business and avoids a terminal insolvency procedure such as liquidation.  The debt is frozen up to the date of the creditors' meeting and, once passed, a monthly contribution, generally out of the cash flow of the debt-free business, is paid to creditors. The CVA process involves the preparation of a business plan and proposal which would explain why the company has its current problems and more importantly how things will improve. Fundamentally, the underlying business must be sound.

Administration

Administration is a process better known for larger companies and football club insolvencies. The insolvency practitioner (IP) takes control of the company at the request of the Directors or secured creditors in order to protect the company from litigation or from creditors attempting to seize assets. During the time of the administration the Administrator works with the directors to create a plan to try to save the company or achieve a better realisation for creditors. The administrator must operate for the benefit of the whole creditor body.

Pre-pack Administration

In a Pre-pack, a company is placed into Administration and the business is sold shortly after the appointment of the administrator. Often, the IP, the directors and the bank will have already obtained valuations, agreed a sales price and drafted contracts to enable the business to be sold immediately after appointment. This is often regarded as a controversial process as creditors often feel aggrieved and the entire scenario needs to be handled with care and in a very transparent manner by a competent and experienced IP.

INFORMAL INSOLVENCY OPTIONS

Banking relationships

Pearson Hinchliffe Commercial Law has sound experience in dealing with cash flow and funding problems faced by clients. Frequently where finances are difficult, the relationships with the company’s funders are equally strained. We can act for the company in negotiating the best way forward. We also have extensive contacts with banks, factoring companies and alternative funders which enable us to formulate plans to help companies recover from debt problems, whether it be sole traders, partnerships or companies. Our experience with these funders enables us to prepare the necessary funding applications and, based upon our experience, advise which funders and individuals are the most appropriate within the organisation.

Specific creditor advice – Inland Revenue

Many companies’ largest creditor is the Crown. i.e. VAT and PAYE arrears. It is common knowledge that negotiating with HMRC is becoming very difficult and they are less tolerant than ever before of late payers, especially if the current monthly debt is not being serviced. We will act on your behalf in dealing with HMRC, especially if they have commenced recovery action.

We can also act on your behalf with other creditors where recovery action has commenced or is about to commence.

Solvent liquidations

In recent years Members Voluntary Liquidations have become more common as directors seek to realise their investments either on retirement or before, so they can take advantage of taper, retirement or other tax reliefs. Other circumstances for an MVL is where a group wishes to divest themselves of a solvent trading subsidiary to enable it to concentrate their efforts elsewhere.

The procedure involves the realisation of the company’s assets in a controlled fashion and the subsequent distribution of surplus cash. The directors need to sign a declaration of solvency, which attests to the company’s status.

Personal Insolvency

Due to a mixture of factors including the dramatic increase in living costs, many individuals are struggling financially now more than ever before. Indeed many civil servants are being made redundant and will be taking new jobs on reduced salaries in order to try to make ends meet. The effect of this will be increased creditor pressure, and a cry for help. There are now various alternatives to bankruptcy which deal with an individual’s creditors and allows them to keep their house. 

Individual Voluntary Arrangements

An IVA deals with individual directors and employees, and helps with their financial problems. A proposal is made to unsecured  creditors for you to repay a fixed amount (often a reduced amount, based on your circumstances), generally over 5 years, providing you with protection from unsecured creditors. Your home is excluded from the IVA and the mortgage payments continue as normal.  An IVA is a very popular alternative to bankruptcy, and does not result in the prohibitions associated with bankruptcy such as not being a director, or a member of some professional bodies.

Partnerships

Similar to the CVA mechanism, insolvent partnerships can propose a Partnership Voluntary Arrangement. In these circumstances the proposal normally pays the partnership creditors a reduced amount in full and final settlement of their debt. Often, the proposal needs an injection of funds and the individual partners may need to enter into an IVA simultaneously. 

Debt Management Plan

A debt management plan is an informal arrangement with creditors. Your income and expenditure is assessed and we negotiate a  single monthly payment with your unsecured creditors based upon what you can afford. In many instances interest and charges are frozen from the time you start the plan, which would mean that any payments start to clear your debt rather than meet monthly bank charges.

Bankruptcy

We are able to provide advice to individuals who are either already bankrupt or have had proceedings commenced or threatened against them. If dealt with in time, the less onerous option of an IVA can still be considered and an interim order obtained to provide time for the IVA to be considered. For those individuals where bankruptcy is the last option, we are able to assist in the completion of the necessary documentation and assist with the entire pre-bankruptcy process. 

CONTACT US

For more information on Pearson Hinchliffe Commercial Law's Corporate Recovery & Insolvency service, please contact a specialist in the team using the details provided below.

Pearson Hinchliffe Commercial Law | Hollinwood Business Centre, Albert Street, Hollinwood, Gtr Manchester, OL8 3QL
Telephone: +44 (0)161 785 3500, Fax: +44 (0)161 624 2589, Email: enquiries@pearson-hinchliffe.co.uk