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Services at Kallis & Company
We are experienced in both corporate and individual insolvencies particularly in
the owner managed business sector.
Our clients are drawn from all industries including the fashion industry both manufacture
and retail, internet service providers, IT consultants, restaurants, bars, and construction.
Experience has shown us that the earlier we are approached about financially troubled
businesses, the wider the range of options available to us in constructing a suitable
strategy.
Whether you are a company or individual and require financial advice we are here
to help. We deal with the following:
Creditors' Voluntary Liquidation
A Creditors' Voluntary Liquidation ('CVL') is when the shareholders of a company
pass an extraordinary resolution to place the company into liquidation due to it
not having sufficient funds to pay its liabilities as they fall due, ie, the company
is insolvent.
A CVL is initiated by a meeting of directors which resolves to convene meetings
of shareholders and creditors, giving at least 14 days notice (unless the timescale
is abridged). A meeting of creditors must subsequently be held within 14 days of
the meeting of shareholders, with at least seven days notice to be given to creditors.
The shareholders meeting resolves to pass an extraordinary resolution that the company
should be placed into voluntary liquidation and that a liquidator be appointed.
The appointment of the liquidator is then ratified at the meeting of creditors,
by a simple majority.
Upon appointment the liquidator realises the company's assets and agree its liabilities.
Should sufficient realisations be made these are distributed to the various classes
of creditors in accordance with the order of priority as scheduled in the Insolvency
Act, 1986.
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Administration
An Administration is a procedure to protect a company from its creditors, allowing
it valuable time to get its affairs in order and to decide the best way forward.
For a company coming under such pressure from its creditors, an Administration may
be vital to save a viable business, which may otherwise be severely damaged or destroyed
by taking no action at all.
An Administrator can be appointed in or out of Court by either the directors, the
holder of a qualifying floating charge or a creditor if they have concerns about
the financial well being of their customer.
Once appointed, an Administrator is responsible for running the company whilst considering
how to achieve the purpose for which he or she was appointed, such as:
- Survival of the company in whole or part (as a going concern),
- Approval of a Company Voluntary Arrangement,
- Sanctioning of a Scheme of Arrangement pursuant to s.425 of the Companies Act 1985,
or
- A more advantageous realisation of assets than in if the company were wound up.
The Administration process is now much more streamlined, which should lead to reduced
costs and improved returns to creditors and provides directors with a formal and
yet flexible avenue of restructuring financially stressed companies.
The Administrator must perform his or her functions quickly and efficiently and
an overall time limit of one year has been introduced. However, in the event that
delays are experienced in finalising matters, the Administration period can be extended
by Court applications or consent of creditors.
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Administrative Receivership
An Administrative Receiver can only be appointed by the holder of a valid floating
charge and acts to achieve the best possible outcome for the chargeholder.
The Administrative Receiver only deals with assets covered by the security under
which he or she is appointed.
Changes in legislation have introduced restrictions on the ability to appoint an
Administrative Receiver, under newer charges (post 15 September 2003) the appointment
of an Administrator by a chargeholder is likely to become a more usual approach.
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Members' Voluntary Liquidation
In certain circumstances, it may be appropriate to wind up a solvent company. This
is done by a Member's Voluntary Liquidation which will be initiated by the directors
but is done through shareholder approval.
This method of asset realisation and distribution to shareholders is tax advantageous
as the final distribution falls under the Capital Gains Rule and not treated as
a dividend.
Directors swear a Declaration of Solvency which lists the assets and liabilities
of the company and states that all company debts will be paid in full (with interest)
within such a period, not exceeding 12 months from the commencement of winding up,
as may be specified in the declaration. A meeting of the shareholders must be held
within five weeks of swearing the Declaration of Solvency.
The meeting of the shareholders passes a Special Resolution placing the company
into Members Voluntary Liquidation. At the same meeting the members appoint a Liquidator.
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Compulsory Liquidation
This occurs when the Court makes an order for the company to be wound up (a winding
up order) on the filing of a petition.
The petition application can be made by:-
- The creditors,
- The company,
- The directors,
- Contributories,
- Department of Trade and Industry,
- The Official Receiver, or
- Administrator, Administrative Receiver and Supervisors
The Official Receiver acts as Liquidator unless or until an Insolvency Practitioner
is appointed Liquidator in his or her place by the creditors at a creditors meeting
or by the Secretary of State. The Liquidator may also be appointed by the Court
at the time of making the Order for the winding up of the company.
Upon appointment the Liquidator realises the company's assets and applies these
in the form of a distribution according to the claims of various classes of creditor.
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Company Voluntary Arrangement
A Company Voluntary Arrangement ('CVA') is a recognised legal procedure, under the
provisions of the Insolvency Act, 1986 whereby a company to enters into a legally
binding agreement with its creditors to repay its liabilities, either in part or
in full over a period of time, while allowing its directors to retain control of
the company.
Generally the company agrees to pay creditors X p in the pound.
A CVA is initiated either by placing the company into Administration,
or by filing a report on the company director(s)' proposals by an Insolvency Practitioner
(who acts as nominee), and various other documents at Court.
A 28 day moratorium automatically comes into effect once the 'proposal' documents
are filed, during which time no other insolvency procedures may be commenced except
with the leave of the Court.
A meeting of the company's creditors must convened between not less than 14 days
and no more than 28 days after the filing of the relevant documentation at the Court,
to consider the proposal.
A CVA requires the approval of a majority of 75% of the voting creditors and if
approved, binds all creditors who were sent notice of the meeting irrespective of
how they voted or whether they attended the meeting.
If the creditors accept the CVA, a licensed Insolvency Practitioner will be appointed
to supervise the arrangement.
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Individual Voluntary Arrangement
An Individual Voluntary Arrangement ("IVA") is a recognised legal procedure that
enables an individual to enter into a binding agreement with their creditors detailing
how that individual's assets and liabilities will be dealt with, it allows an individual
to retain control of his business or continue life as normal.
In essence, an IVA allows individuals with cash flow difficulties to repay his or
her liabilities, either in part or full depending on what they can comfortably afford
(including debts due to HMR&C) over a period of time.
A Licensed Insolvency Practitioner is instructed to act as the "Nominee" to assist
with the preparation of a Statement of Affairs and the formulation of a proposal.
The proposal should be comprehensive, and must cover such matters as:-
- The reasons for the Arrangement,
- Particulars of the debtor's asset, and how they are to be dealt with,
- The manner in which the liabilities are to be dealt with, particularly secured creditors,
preferential creditors, unsecured creditors and debts due to associates of the debtor,
- The duration of the Arrangement,
- The name, address and qualifications of the proposed Supervisor,
- The remuneration of the Supervisor,
- Whether the business is to continue, and if so, on what terms,
- Banking arrangements, and
- Powers and duties of the Supervisor.
The Nominee must report to the Court in respect of the proposal and if he/she recommends
that a meeting of creditors should be called to consider the proposal.
An IVA requires the approval of a majority of 75% of the voting creditors and if
approved, binds all creditors who were sent notice of the meeting irrespective of
how they voted or whether they attended the meeting.
Assuming 75% of creditors accept the proposal, a "Supervisor" is appointed who to
manage the scheme. Dividends to Creditors are paid annually unless otherwise specified
in the proposal or modifications.
Although Individual Voluntary Arrangements are not advertised they are registered
and a search can be made by any credit agency to establish that an individual has
entered into a Voluntary Arrangement.
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