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Corporate Insolvency
Administrations
This procedure places the company under the control of an Insolvency Practitioner, with the protection of the court, with one of the following objectives:
* Rescuing the company as a going concern.
* Achieving a better result for the creditors than would be likely upon a winding up of the company.
* Or if these are not applicable, realising property to make a distribution to the creditors.
Company Voluntary Arrangements (CVAs)
A CVA is a procedure that enables the company to put a proposal to its creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs. A composition is an agreement under which creditors agree to accept a certain sum of money in settlement of the debts due to them.
The proposed arrangement requires the approval of at least 75 percent in value of the creditors, and once approved is legally binding on the company and all its creditors, whether or not they voted in favour of it. There is limited involvement by the court, and the scheme is under the control of an insolvency practitioner acting as a supervisor. Typically a CVA will last from two to four years.
Liquidations
Liquidation (or ‘winding up') is the most common type of corporate insolvency procedure. Liquidation is the formal winding up of a company's affairs, entailing the realisation of its assets and the distribution of proceeds in a prescribed order of priority.
A liquidation maybe either compulsory, when it is instituted by order of the court, or voluntary, when it is instituted by resolution of the shareholders. Voluntary liquidation is the more common of the two. An insolvent voluntary liquidation is known as a ‘creditors' voluntary liquidation' because its conduct is primarily under the control of the creditors. A solvent voluntary liquidation is known as a ‘members' voluntary liquidation', because its conduct is primarily under the control of its members.