The answers to your frequently asked questions
Creditors are the people or businesses which have lent your company money, which needs to be repaid.
What are pre pack insolvencies?
A prepack insolvency is a process for the handling of an insolvent company's assets and is put in place before the company goes into a formal insolvency process. Most commonly, it is used as an insolvency service in conjunction with either the administration order or a type of liquidation help e.g. Company Voluntary Arrangement, Members' Voluntary Liquidation, Creditors' Voluntary Liquidation etc...
CVA stands for company voluntary arrangement.
What is a CVA?
A company voluntary arrangement is a debt solution for companies facing financial difficulty. It is a legally binding agreement between a company and its creditors to compromise on debts owed.
How long does a CVA last?
This depends on each individual case. A CVA can last anywhere between six months and five years
The creditors of a company must agree to accept the proposed CVA. For the CVA to become official, 75% of the creditors or more must agree to the CVA.
How long does the CVA application process take?
It is usually a matter of weeks before a Company Voluntary Arrangement can be put in place if it is accepted by the company creditors. Though this time can vary depending how quickly communication and paperwork is done.
Do the company shareholders have to meet the company creditors?
Both the company shareholders and creditors will be required to attend meetings where the CVA can be proposed, however the company creditors will usually vote for or against the CVA via fax or post.
Will the creditors need to be paid directly?
No, payments will be made to the financial practitioner acting on your behalf, which will then be distributed amongst creditors.
Will the CVA be made public?
Your CVA will be kept out of the press and is not advertised unlike liquidation. Basic details of your CVA are available to the public but CVAs are generally a confidential agreement between you and your creditors.
How can a CVA help my business?
CVAs can help to reduce overall debt, increase cash flow and allow a company to continue trading in times of financial difficulty. Providing you stick to the terms of your CVA, you will be legally protected from your creditors.
Can a CVA affect my business in the future?
You may find it difficult to secure credit for your business in the future because of your CVA.
Can I change the conditions or my CVA if my circumstances change?
You may change your CVA at any time if your circumstances change in any way; however, changes to the CVA must be approved by the creditors.
What if I can't make the repayments of my CVA?
Crown Debt and their approved partners will ensure that your CVA is viable and that you will manage to make the payments on time. However, if your circumstances change in any way you must notify your insolvency practitioner who will be able to help. If you do not notify your insolvency practitioner and fail to keep up with payments or the terms stated in your CVA, your creditors may be able to take legal action against you.
Will I need to go to court?
You will not need to attend court regarding your CVA. All legal aspects will be dealt with by your insolvency practitioner.
What does CVL mean?
CVL stands for creditors voluntary liquidation.
What is CVL?
Creditors' voluntary liquidation is when an insolvent company is voluntarily brought to an end and all assets are turned into money which can be distributed among creditors.
When should a company consider CVL?
Usually, creditors' voluntary liquidation is the best option when a business has run its course, has little money or valuable assets to pay off debts owed, and has no feasible avenue to continue trading. There are many options available to companies facing financial difficulty and creditors' voluntary liquidation should only really be considered as the last option.
What happens after CVL?
After the company has been placed into liquidation it ceases to exist and the business is unable to continue trading.
What are the benefits of creditor voluntary liquidation?
Creditor voluntary liquidation can take away the burden of pressure and stress, relieving you of worry and uncertainty. It is a quick and final solution to serious financial problems. Creditors can rest assured that their interests will be maximised while directors will have minimum exposure to wrongful trading issues. However, the directors' conduct could be investigated which could be an advantage for company creditors.
What are the disadvantages of CVL?
There is usually small and sometimes no return for shareholders and directors and a low return for creditors. Also, the likelihood of continued trade is usually low.
What is an administration order?
An administration order is granted by the county courts and protects an individual or company against its creditors. An administration order is an alternative to liquidation, which is also referred to as 'winding up'.
What are the benefits of an administration order?
For companies, an administration order can grant the time needed for the management to salvage part of a company. This may be done through a sale or restructuring the business. Administration orders also provide protection from creditors as soon as the petition is lodged at court.
What are the disadvantages of an administration order?
The procedure of securing an administration order can be expensive and could fail if you do not make payments on time. Directors will also no longer be in control of running the company.
How can I apply for an administration order?
The directors of the company will need to present a petition on behalf of the company, requesting an administration order. It may be necessary to appoint an administrator to complete a report detailing financial and organisational information, which supports the petition for an administration order.
How long does an administration order last?
An administration order usually lasts three months, during which time the insolvency practitioner will decide on the best course of action for the company, and agree this with the creditors involved.
What does MVL mean?
Members voluntary liquidation.
What is MVL?
Members' voluntary liquidation is a form of company insolvency and occurs when the shareholders of a company decide to voluntarily close a company and stop trading.
What happens after MVL?
The business is wound up (also known as 'winding up a company') and ceases to exist. All remaining assets will either be distributed or contributed towards any outstanding debts owed by the company.
What is the difference between members voluntary liquidation and creditors voluntary liquidation?
MVL occurs when the members of a company decide to put it into liquidation. The company is solvent and has enough money to pay everyone in full. The process involved in MVL is similar to that of insolvent liquidation, except the company directors will not be investigated.
What are the benefits of MVL?
MVL is cheaper and less formal than creditors voluntary liquidation (CVL), there is no report on the directors' conduct, the liquidator will be responsible for distributing funds and assets among directors and shareholders and MVL can be used to separate different businesses within a company.
How long does MVL take?
The members voluntary liquidation process is straight forward and literally takes a matter of weeks.
Who is responsible for distributing assets?
An insolvency practitioner must be appointed in order to put the company into liquidation as this requires a legal license. It is the insolvency practitioner who will be responsible for disposing of remaining assets, ensuringcreditors are paid and distributing surplus funds among shareholders.
Will the company be investigated?
No. The company has already declared it is solvent and so there is no need to investigate. There are instances where the insolvency practitioners may find the company is insolvent after all, and therefore the directors could be liable to receive a fine or imprisonment for making false claims of solvency.
What is commercial finance?
Commercial finance is funding that is used to support your business or business venture. It is a loan that is usually calculated depending on the assets of a business.
How could commercial finance help my business?
Securing commercial finance could provide your company with huge potential to grow and expand in your current industry or into new markets.
Who can apply for commercial finance?
This ultimately depends on your business and the assets you own. Any commercial funding provided to your company will be calculated depending on the assets of that business. This is to ensure that you will eventually be able to pay back the loan you are borrowing.
What are the benefits of commercial finance?
There are many benefits to commercial finance - it can improve cash flow, free money tied up in invoices and other assets, aid business growth, allow for starting a new business venture, help your business through a difficult trading period and help to fund new acquisitions.
How do I apply for commercial finance?
Simply give Crown Debt.co.uk a call. One of our friendly advisors will tell you everything you need to know about commercial finance, on a confidential and no obligatory basis. It is always wise to seek professional advice and ensure that you are in need of funding for a viable business adventure. Borrowing money should be given serious consideration and requires excellent financial management to ensure your business grows from strength to strength.
What is a phoenix company?
A phoenix company is a business vessel that emerges from the collapse of another company through insolvency. The assets are moved from the insolvent Limited company to the phoenix company.
Is it legal to start a phoenix company?
Yes, the idea behind phoenix companies is to promote and protect entrepreneurship however, the phoenix company may not be able to use the same trading name as the predecessor.
Why start a phoenix company?
Phoenix companies allow a business to transfer assets from a failed company to a new legal entity to begin trading again. If you have a viable business but your previous company has struggled with financial difficulties then beginning a phoenix company could be the way forward.
Can the directors of the failed company take up same positions at the phoenix company?
Yes, any director of a failed company can take up the same position at a phoenix company providing they have not been made subject to a disqualification order or undertaking, they are not personally bankrupt, and they are not subject to a bankruptcy restrictions order or undertaking.
Can the business at the phoenix company be the same as its predecessor?
Yes, phoenix companies can operate in the same industries as the previous company.
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