Corporate Procedures

Where the company is clearly insolvent, the right course of action will depend upon a number of factors:
Is the situation capable of being turned around?
Do the directors and shareholders see a future for the business?
Have the stakeholders accepted that the situation is untenable and trading should be brought to early closure?


Procedures to be considered:
Company Voluntary Arrangement [CVA]

A CVA is a formal corporate turnaround procedure that allows a company to ring-fence historic debt and reach agreement with its creditors as to how that debt is to be repaid, in full or in part. It provides legal protection to the company and leaves the directors in control of all company operations and decision making. The process is overseen by a Licensed Insolvency Practitioner, who acts a Nominee under the proposal and then as Supervisor of the arrangement.

It is a highly flexible business rescue tool governed by the Insolvency Act 1986 where a company enter into a legally binding agreement with its creditors. It gives the company breathing space in which to try and trade out of its difficulties or give it time to sell its assets to provide a better outcome for creditors than liquidation. Payments to existing creditors are frozen and the directors are left in control of the company’s affairs whilst a Licensed Insolvency Practitioner will act as Supervisor ensuring that the agreement that has been reached is adhered to by all sides. Quite often creditors will be required to write off significant amounts of debt as part of the CVA agreement.


Administration is a business rescue tool governed by the Insolvency Act 1986 (the “Act”). It provides an insolvent company with a period of statutory protection from creditors, allowing the Administrator, working with the directors, time to formulate a strategy going forward. Getting the company into Administration does not require an application to Court and can be done very quickly, thereby getting early protection from pressing creditors. The objectives of the Administration are laid down in the Act and can include the rescue of the company as a going concern or the sale of the company’s business and assets.

Pre-Pack Administration

An arrangement under which the sale of all the business and assets is negotiated with a purchaser [can be a third party or the existing management team, or a combination of both] prior to the appointment of an Administrator, and the Administrator effects the sale immediately on, or shortly after his appointment. Such a Pre-Pack Sale does not require the approval of the court or the creditors although there are safeguards in place to ensure that such a sale is both legal and transparent. Done properly, the process gives continuity and maintains the value in the business, as well as preserving jobs.

Creditors’ Voluntary Liquidation [CVL] – Insolvent

A formal winding up of a company’s business affairs governed by the provisions of the Insolvency Act 1986. The process is instigated by the directors of the company and the company is actually placed into liquidation by way of special resolution of the shareholders. Following the introduction of the Insolvency (England and Wales) Rules 2016, it is often not necessary for a meeting of creditors to be convened, unless required by creditors in accordance with the statutory requirements.. However, creditors must be provided with information in compliance with the statutory requirements concerning the company’s assets and liabilities and an explanation of the reasons for the insolvency of the company. A Licensed Insolvency Practitioner is appointed as Liquidator and the Liquidator’s main function is to realise assets and distribute monies to the creditors by way of dividend. In addition, the Liquidator must investigate the company’s affairs and make a report to the Insolvency Service on the conduct of any party that has been a director (or acted in the capacity of a director) in the three years leading up to the commencement of the liquidation.

Members’ Voluntary Liquidation [MVL]

A formal winding up of a solvent company’s affairs but still governed by the Insolvency Act 1986. An MVL is undertaken to realise value for the benefit of shareholders in a tax efficient way, or as part of a group re-structuring, or simply because the company is no longer required.

The company will usually have ceased trading, often following the sale of its business and assets, and there is no longer any need for the company. An MVL is often a highly tax efficient way of returning surplus assets to shareholders/members. Shareholders may qualify for Entrepreneurs’ Relief, subject to meeting the criteria, meaning that their qualifying capital gains are taxed at a more attractive rate.

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