Help for Directors

All businesses face the occasional financial crisis but when they become a critical problem you need to know exactly where you stand. In our help for directors section, you will find specific information for answering your questions around if you are insolvent, what you need to do if you are and how it will affect you.

Creditors Voluntary Liquidation

What is known as Creditors Voluntary Liquidation is the process that most businesses must go through if they are insolvent. It can be a difficult time for everyone involved, so we have created this special section of our site to give you the important facts about CVLs in a clear and down to earth way so you can see where you stand.

Members Voluntary Liquidation

This is when your company is still solvent, but you (and your fellow directors) decide it is time to call it a day and retire or move on to the next stage of your lives.  With an MVL, you will release the assets and use these funds to pay off the creditors before returning the remaining funds to the shareholders.

Company Moratorium

Following new government legislation introduced in 2020, Companies can enter a Moratorium. It is designed to provide a short breathing space to protect the Company from creditor action while plans are formed to rescue the Company as a going concern.

 

What is the Insolvency Moratorium?

 

A Moratorium differs from other formal insolvency solutions in that it is what is known as a ‘debtor in possession’ procedure. The Directors remain in control of the Company and are responsible for the day-to-day running of the Company whilst the Insolvency Practitioner acts as Monitor and oversees the Company’s trading position and meets the eligibility requirements.

A Company moratorium prevents legal action from being taken against the Company without court permission. This will apply to the following:

·        No petitions for a winding-up order can be made.

·        No petition for administration can be proposed and no administrative receiver can be presented or appointed.

·        Landlords are not able to implement any Commercial Rent Arrears Recovery (CRAR).

·        No action can be taken to secure or repossess Hire Purchase or Retention of Title Goods.

·        No other legal action can be taken.

This protection is provided for 20 business days and can be extended for a further 20 business days without consent or for longer with the agreement of pre moratorium creditors or the court.

 
Eligibility


Generally, companies are eligible to use the Moratorium if:

they are incorporated under the Companies Act 2006 or they are unregistered but may be wound up under the Insolvency Act 1986 (this category includes overseas Companies);
the directors state that the Company is, or is likely to become, unable to pay its debts; and
the Monitor is of the view that it is likely a moratorium would result in the rescue of the Company as a going concern.
During the Moratorium period, the Company must also continue to pay the following:

·        The Monitor’s fees and expenses

·        Any goods or services provided during the period

·        All employee entitlements

·        Rent in respect of the moratorium period

·        Any liabilities arising under financial services contracts

 

How does the Moratorium conclude?

There are a number of ways the Moratorium can end, these are as follows:

·        Creditors approve a Company Voluntary Arrangement.

·        An informal payment plan is agreed with creditors.

·        Or it may exit into Administration or Liquidation if no rescue plan is agreed.

 

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Find out more about how we can support you when times are tough.  We’re here to help with clear, straightforward support.

Call us on 0116 2325117 (Leicester), 01926 671891 (Warwick), 02476 017639 (Coventry), 01604 263179 (Northampton), or email us at info@smartbusinessrecovery.co.uk