FAQs | Chamberlain & Co

Can I wind up my company even if it's not insolvent?

Yes. You need to speak to an Insolvency Practitioner to assist you to place your company into a solvent liquidation otherwise known as a Members Voluntary Liquidation (‘MVL’) , Alternatively the company could be struck off or dissolved, each of which carries risks.

How do I close my company and retire?

If you wish to cease trading and/or sell the business of the company, the shareholders may wish to place the company into MVL or distribute the proceeds by way of a dividend and then apply for the company to be struck off . It is also important to obtain specialist advice regarding the most tax efficient method of distributing the net value of the company to its shareholders.

What are the consequences of a winding up petition?

The company’s bankers will usually freeze the company’s bank account on receipt of the petition or upon its advertisment. - Any disposal of the company’s property, or payments to creditors, after the date of the petition may be recoverable by a liquidator. - Customer contracts may be cancelled. The petition is advertised in the London Gazette. A winding up order may be made if the petition debt is not paid.

What are the consequences of a winding up order?

- The directors’ powers cease. - The employees’ contracts of employment are automatically severed. - All enforcement procedures (other than those taken by a landlord) are stopped. - It is likely that the company will cease to trade. The winding up order is advertised in the London Gazette. - The Official Receiver is receiver and manager of the company’s affairs. A report on the director’s conduct will be submitted to the Department of Trade & Industry.

Can a company continue to trade even if it's insolvent?

Yes. Only as a part of a formal insolvency procedure or restructure agreed by all creditors. In these circumstances directors should not continue to trade until expert advice has been received from an Insolvency Practitioner. A director should be aware that he may become personally liable for any debts incurred after a time when he knew or ought to have known that the company was insolvent.

Can a company reach an agreement with its creditors to enable it to continue to trade?

Yes. The most effective way to achieve this is by directors proposing a CVA , whereby they will utilise the income and assets of the company to settle its liabilities.

At what point might I become personally liable for my company's debts?

If you continue trading after a time at which a reasonable director would have known, or ought to have known that the company was insolvent or unable to pay its debts. You may also become liable if the company defaults on the servicing of any liability which you have personally guaranteed.

When do I become liable for a personal guarantee concerning a company's borrowing?

You may become liable if the company defaults on the servicing of any liability which you have personally guaranteed. In the event of formal insolvency, it is likely that the terms of the guarantee will result in demand being made upon you as guarantor.

Am I likely to be disqualified as a director?

It is not an automatic result of any corporate insolvency procedure that a director is disqualified. However, in compulsory liquidations, CVL’s, administrations, and administrative receiverships, a report on the directors’ conduct must be submitted to the Department for Business, Enterprise and Regulatory Reform. An adverse report may result in disqualification proceedings being brought against a director by the Department of Trade and Industry.

Could I buy the business and/or assets back from the liquidator?

This is possible. However there are specific guidelines as to how such transactions can be effected to ensure that there is transparency and that realisations are maximised for the benefit of creditors.

Can I place my company into liquidation before my creditors do?

Yes. The shareholders can resolve to wind up the company and appoint a liquidator. This decision must be ratified at a subsequent creditors meeting. This can be done prior to any creditor obtaining a winding up order.

What are the insolvency options available to the company?

There are various options available to a company as detailed below: - Administration can be initiated by shareholders, directors, liquidator, and creditors. Generally used by directors to obtain a moratorium to allow the company to consider its options. May be used by a holder of a floating charge to recover its lending. - Creditors Voluntary Liquidation can only be initiated by agreement of 75% of the shareholders who also nominate a liquidator. Requires ratification by simple majority in value of creditors voting at the subsequent meeting of creditors. This is generally the most common procedure used to wind up an insolvent company. - Compulsory Liquidation is initiated by the presentation of a petition at court by (generally) a creditor who is owed in excess of £750. The Liquidator is appointed by a meeting of creditors summoned by the Official Receiver. The Official Receiver is also responsible for the investigation of the affairs of the company and the directors’ conduct. - Company Voluntary Arrangement is generally initiated by the directors who put a proposal to settle the company’s liabilities from a combination of future income and assets before a meeting of creditors. The proposal must be approved by greater than 75% in value of creditors voting at the meeting. - Members Voluntary Liquidation can only be used if company is solvent. It is initiated by the shareholders and is usually a mechanism for the tax efficient distribution of the company’s assets. - Law of Property Act Receiver is appointed by a holder of a fixed charge to deal solely with the management and sale of a specific asset. - Court Appointed Receiver is appointed by the court to deal with the assets and affairs of the company. This is generally initiated by the directors, but is not an often used insolvency procedure. - Administrative Receivership can only be initiated by a holder of a floating charge. This is typically a lender-driven process and generally used to maximise the return to the appointer. It usually involves a change in management. - Restructure Business and/or finance is initiated by the directors where insolvency caused by liquidity can be relieved by altering the financial structure.

The bank wishes to appoint investigating accountants, what can I do?

Seek the advice of an insolvency practitioner to establish the options available to the directors. Ask the bank if you can nominate investigating accountants which are of your choice but are acceptable to the bank. It is important to ask for a specific clause to be inserted in the instruction letter that any appointed investigating accountant should not accept any subsequent formal insolvency appointment in relation to that company.

The company has cash flow difficulties, what can I do?

There are an array of potential options. However, it is important that you seek early professional advice, as making the wrong moves at this point can be disastrous to the company. Chamberlain & Co have a wealth of experience in advising directors in taking the right decision. The options range from some simple restructuring through to formal insolvency.

I have received notice of a creditors meeting from a major customer, what can I do?

Consider instructing Chamberlain & Co to attend the meeting of creditors with you or on your behalf. We can ensure that the relevant questions are asked to maximise any possible return to you. With the support of the majority of creditors attending the meeting Chamberlain & Co could take over the liquidation.

What can a bailiff do?

A bailiff has the power to remove or take ‘walking possession’ over the company’s assets. It is imperative that you contact us as soon as possible to negotiate with the bailiff on your behalf and to take the appropriate action to protect your business.

Can the company protect its assets?

Yes. There are a variety of ways in which the company can protect its assets. Professional advice from experts such as Chamberlain & Co is critical at this point to optimise the potential outcome for the company.

Can a minority shareholder wind up the company?

Yes. The shareholder can petition the court that the company be compulsorily wound up on the grounds that it is just and equitable in that either his position as a minority shareholder has been unfairly prejudiced, or that there is deadlock between the shareholders.

Do directors/shareholders have to attend a meeting of creditors?

This is dependent upon the type of insolvency proceedings to which the company is subject. Briefly, attendance is required for CVLs and CVAs, but it is not mandatory for any other procedures, although it may be requested by the appointed Insolvency Practitioner.

I think the company may be insolvent, can I pay the wages?

This is a complex area and is dependent upon the particular circumstances in each case. You should seek specialist advice from Chamberlain & Co in these instances.

Is the company's failure advertised?

Yes, other than in a CVA, the appointment of an Insolvency Practitioner is advertised in the London Gazette.

In what circumstances do I get repayment of my director's loan account?

In respect of a CVA the director’s loan account is generally deferred until the arrangement has been successfully completed, thereafter it can be paid in full. In respect of any other insolvency procedures the director’s loan account would rank as an unsecured claim alongside trade and other creditors and is unlikely to be repaid in full. A director’s loan account can be secured if the director took a private debenture over the company prior to lending the money.

Can I sell a company's assets before insolvency?

The assets of a company can be sold prior to insolvency if the transaction is for fair value and at arm’s length. The valuation should be supported by a written valuation by an appropriately qualified professional.

Can a company trade while in administration?

The company may be traded in administration but it will be trading is under the control of the administrator while the options for the company are explored.

How to remove a personal guarantee in respect of a bank account?

If a company is insolvent and you have personally guaranteed the company’s overdraft facility, the bank has the right to demand repayment from you. Any payment made by yourself would allow you to be able to claim in the insolvency. You would “stand in the shoes of the bank” for the amount claimed and have the benefit of any priority that it might enjoy over other creditors due to any security held over the company’s assets.

Is my house at risk if a limited company becomes insolvent?

If you are a director of a limited company which becomes subject to an insolvency proceeding, your house would be protected from any action unless you have personally guaranteed any of the company’s liabilities. You and the company are separate legal entities. Your personal assets are at risk only if you have personally guaranteed any of the company’s liabilities or if you are found guilty of fraudulent or wrongful trading.

The position of employees in insolvency?

Under the provisions of the Employment Rights Act 1996, any claim that you may have for arrears of pay, accrued holiday pay, redundancy pay or pay in lieu of notice will, subject to certain limitations, be paid to you by the Department of Employment out of the National Insurance Fund. You will need to send a completed form RP1 to the Department of Employment to claim any arrears of pay, redundancy pay, holiday pay or pay in lieu of notice.

Creditors' meetings appropriate questions?

- What are the reasons for the company’s failure? - Will there be any return to creditors? - What are the directors’ future intentions? - What is the position with regard to director’s loan accounts? - Have the directors been involved in any previous insolvencies?

Can I legally retain goods in lieu of payment?

Should you have a valid retention of title claim on goods supplied, you may request these to be returned should the goods are still in the company’s possession upon insolvency and can be specifically identified. If the company has not commenced any insolvency process, you would be able to obtain a judgement against the company and instruct a bailiff to seize assets located at the company’s premises. If you are a warehouse man, you could exercise a lien on goods for unpaid charges. Similarly other tradesmen have similar rights. Solicitors have a right to a lien over documents of title held for work done thereon.

What is the procedure for winding up a company?

As a creditor for more than £750, you are able to petition for the winding up of a company if you have an outstanding unsatisfied judgement or have issued a statutory demand against the company which has not been satisfied or set aside after 21 days. A petition can then be lodged in court for sealing and endorsing with a date and time for a hearing for the petition to be heard. The petition is served on the company and advertised in the London Gazette. The bank should freeze the company’s bank account upon the advertising of the order. Any subsequent payments from the bank account can only be made upon receiving court sanction. At the hearing the petition to wind up the company will be adjourned, made or dismissed.

Will I lose my house?

Not necessarily. However, if there is equity in your house, this will need to be dealt with. An individual voluntary arrangement (“IVA”) can allow you to keep your house. However, if you are unable to pay your creditors in full by other means, it is likely that you will be required to make a payment to your creditors in lieu of the value of your share of any equity in your house. In bankruptcy, your share of any equity in your home is transferred to your trustee when you are made bankrupt. You (or alternatively, prior to your discharge from bankruptcy, a third party) will, therefore, need to negotiate with him to buy out his interest; otherwise he may be obliged to sell the property. If you have dependants living in your home with you, it is likely that the trustee will have to wait at least 12 months before taking steps to sell the property. The trustee does, however, have to take steps to realise his interest within three years of the date of the bankruptcy order. If there is no equity, the house may still be at risk in bankruptcy, if the trustee is obliged to sell the house in order to release the value of a linked endowment policy.

Will I lose my car / personal possessions?

Not necessarily. In bankruptcy it depends on their value. Household possessions of reasonable value can be retained, as can a motor vehicle of modest value needed for work / business. In an IVA, the retention of assets is open to negotiation with your creditors. However, there is a good prospect that creditors would allow you to retain a vehicle of reasonable value, particularly if you need it to earn a living. Hire purchase assets are subject to separate rules and can be repossessed as a result of the bankruptcy. They usually will be repossessed if payments are not maintained.

How can I keep my financial position private?

By coming to an informal agreement with your creditors. In bankruptcy, details of the bankruptcy order are advertised in the London Gazette. Whilst there is no similar requirement to advertise IVAs in newspapers, details of both IVAs and bankruptcies are recorded on the Individual Insolvency Register maintained by The Insolvency Service, and this register is in the public domain. Details of any bankruptcies or IVAs will also appear on the credit files maintained by credit reference agencies.

What are the consequences of bankruptcy?

The main consequences of bankruptcy are as follows: - Your credit rating will be affected. - You will be an undischarged bankrupt for up to 12 months, unless you have previously been bankrupt or the Official Receiver obtains a bankruptcy restriction order against you due to inappropriate conduct prior to your bankruptcy. - You lose control of your assets as these automatically transfer to (“vest in”) your trustee. - You must co-operate with the court and attend at any public or private examinations, if required. - You may have to make payments from any surplus income to your trustee for up to three years. - You may be prevented from practising by certain professional bodies and cannot act as a director of a limited company. - The bankruptcy order is advertised in the London Gazette. - The court may stay any other legal proceedings being taken against you - Your trustee is obliged to realise the value of your interest in any equity in your matrimonial home and may have to seek an order for possession and sale of that property.

What are the consequences of an IVA?

An IVA is a means to avoid bankruptcy and can allow you to retain certain assets. The main consequences of an IVA are as follows: - You will not automatically lose control of your assets. - The IVA is not advertised. - An IVA may postpone or avoid the sale of the family home. - An IVA will not necessarily prevent you from practising in certain professions, unlike bankruptcy. - It is easier for you to remain in business. There is less stigma than with bankruptcy. - An IVA can allow you to organise your tax affairs, i.e. to plan disposals to maximise tax allowances. - If your IVA is approved all unsecured creditors will be bound by its terms - Creditors may suggest modifications to the terms of the voluntary arrangement, which may include the sale of the family home or the realisation of some or all of the equity in that property. - If you fail to comply with your obligations according to the terms of the proposal, a bankruptcy petition may be issued against you by the Supervisor of the IVA. - There is no automatic discharge, you are released from an IVA once all the terms of the IVA have been complied with.

What can a bailiff do?

In certain circumstances a bailiff can remove goods in an attempt to settle an outstanding debt. If you receive notice that a bailiff intends to visit your home or business premises, you should seek immediate help. In such circumstances, a member of staff at Chamberlain & Co can speak to the bailiff, on your behalf, and may be able to negotiate with him to prevent your assets being removed.

What is a Statutory Demand?

This is a legal document formally demanding payment of an outstanding debt. If you fail to either pay the debt within the stipulated time period or apply to have the demand set aside, this provides grounds for a creditor to successfully present a bankruptcy petition.

Will I have to contribute anything from my income?

In bankruptcy your trustee may ask you to make contributions from any surplus income for the benefit of creditors. If you refuse, he may apply to court for an Income Payments Order, which may lead to the amounts concerned being deducted from your salary by your employers and paid direct to the trustee. Income Payments Orders can last for a maximum of three years. In an IVA it is usual for a proposal to include affordable monthly contributions for the benefit of creditors, generally for a period of five years.

Is my pension safe?

Yes. Since 29 May 2000 pension assets have been protected from any claims by a trustee in bankruptcy. However, regular income already being received from pension funds may be subject to an income payments order.

Will my friends and family find out?

Not in an IVA, as this is a private agreement between you and your creditors, of which only your creditors will receive notice. In bankruptcy, the Official Receiver will advertise the bankruptcy order in The London Gazette.

Can I do an IVA if I am currently bankrupt?

It is possible for an undischarged bankrupt to propose an IVA to their creditors. If approved, the bankruptcy can be annulled. If the terms of the proposed IVA are straight forward, the Official Receiver can assist in proposing a ‘Fast Track IVA’.

Can I still be the director of a limited company?

In bankruptcy you are automatically banned from being a director, whereas in an IVA you may still continue to act.

Can I enter an IVA if I have previously proposed / had an IVA approved?

Yes, although you cannot apply for an interim order, which gives you protection from your creditors, within 12 months of a previous application for an interim order. In reality, your creditors are unlikely to approve a second arrangement if a previous IVA has failed.

I have been made bankrupt before - can I still do an IVA?

Yes, although the insolvency practitioner (“Nominee”) will be required to report to the court if you have been subject to any previous insolvency proceedings, including any prior bankruptcies or IVAs.

What is an IVA?

Widely used by individuals seeking to avoid the stigma of bankruptcy, an Individual Voluntary Arrangement (IVA) is a formal agreement between a person owing money (“debtor”) and his or her creditors, under which the debtor undertakes to makes certain payments or realise certain assets, or both, in full and final settlement of their debts via an Individual Voluntary Arrangement.

What is an administration?

How long does it take to liquidate a company?

What happens to employees when a company goes into liquidation?

What is a Creditor’s Voluntary Liquidation?

What is a Company Voluntary arrangement?

How long can a company stay in liquidation?

How do bankruptcies work?

What happens after liquidation?

What are the types of liquidation?

What is personal bankruptcy?

What is an Individual Voluntary Arrangement?

What are the Insolvency warning signs?

Could corporate restructuring help?

What does pre pack administration mean?

What is liquidation of a company?

What does liquidation mean for employees?

What is an exit strategy?

What is the liquidation of assets?

What is business restructuring?

Can i start up a limited company immediately after liquidation?

My business is failing what are my options?

What is the role of a creditor during insolvency?

What does Company Dissolution mean?

What is meant by business rescue & how does it operate?

What is the purpose of business rescue?

What is an exit strategy in business?

When the company goes into Administration who gets paid first?

How long can a company be under Administration?

What is a company under Administration?

What is the role of an Insolvency Practitioner?

What does Liquidation mean?

What does an Insolvency notice mean for a company?

What does an insolvency notice mean for an individual?

What does Insolvency mean for tax purposes?

What does Insolvency mean for employee's?

How much does Insolvency cost?

What is an Insolvency Practitioner?

How to choose the right Insolvency Practitioner?

How to avoid a cash flow crisis?

What is the difference between Administration & Liquidation?

What is the difference between IVA & Bankruptcy?

What are Bankruptcy proceedings?

What is Bankruptcy?

Can a company be rescued without Liquidation?

What will happen to all my assets if my company enters Liquidation?

What is the difference between a Winding up Petition & Order?

What happens if a creditor issues a Winding up Petition against me?

As an individual, can I keep my Insolvency private?

Is it possible to keep the insolvency of my company private?

Can a winding up order be reversed?

How does business rescue work?

How does voluntary liquidation work?

How do I declare myself bankrupt?

After bankruptcy will I be able to keep my house?

Can I challenge my bankruptcy order?