Business Insolvency Solicitors — Company Rescue, Restructuring, and Director Advice

Take specialist advice immediately. A solicitor and an insolvency practitioner working together can advise on: whether the company can be rescued (CVA, administration, CIGA moratorium); whether a pre-pack sale is appropriate; whether the directors need to take specific steps to minimise the risk of wrongful trading liability (formal board minutes, seeking advice, notifying creditors of the position); and whether an orderly creditors' voluntary liquidation is preferable to waiting for a creditor to present a winding-up petition. Early advice almost always produces a better outcome — for the business, the creditors, and the directors personally.

A pre-pack administration is a process where the business and assets of an insolvent company are sold (typically to a connected purchaser — the existing directors or shareholders) immediately upon the appointment of an administrator, before creditors are notified of the sale. Pre-packs are lawful where the administrator concludes that an immediate sale achieves the best price for creditors. However, they are controversial because creditors (particularly unsecured creditors) have no opportunity to challenge the sale or offer a higher price. Under the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021, sales of a substantial part of the business to connected persons within 8 weeks of appointment require either creditor approval or an independent evaluator's report. A solicitor advises on compliance with the new regulations.

Administrative receivership was largely abolished by the Enterprise Act 2002 — qualifying floating charge holders now generally appoint an administrator rather than a receiver. Fixed charge receivership is still available to holders of a fixed charge over specific assets (for example, a mortgage over land or plant and machinery). A fixed charge receiver takes control of the charged asset and realises it for the benefit of the charge holder. A solicitor advises on the scope of any fixed charge, the validity of the receiver's appointment, and the rights of the company and other creditors in respect of the charged assets and any surplus after the charge is discharged.

The statutory order of priority in a liquidation is: (i) the costs and expenses of the liquidation (including the liquidator's fees); (ii) preferential creditors — primarily current and former employees (wages, holiday pay, and contributions to occupational pension schemes, up to specified limits; HMRC is also a secondary preferential creditor for VAT, PAYE, and national insurance — Crown preference was reinstated by the Finance Act 2020); (iii) the holder of a qualifying floating charge (net of sums payable to the "prescribed part" — a ring-fenced fund for unsecured creditors); (iv) unsecured creditors (typically receiving pence in the pound); and (v) shareholders. Secured creditors holding fixed charges are paid first from the charged assets, outside the liquidation priority order.

You can set up a new company, but significant restrictions apply. Under s.216 of the Insolvency Act 1986, a director of an insolvent company cannot, for 5 years after the date of liquidation, be a director or otherwise involved in the management of a company with the same or a similar name (a "prohibited name") without court leave or satisfying one of the statutory exceptions. Breach of s.216 is a criminal offence and the director is personally liable for the new company's debts during the period of the breach. A solicitor advises on the prescribed exceptions and, where necessary, applies to court for leave to use the prohibited name.