Please find below a list of Frequently asked questions and answers:
1. What does it mean to be insolvent?
Insolvency is when a company or an individual have greater liabilities than assets and they cannot pay their debts as they fall due. Directors who continue to trade whilst insolvent may face personal action if they continue to incur further credit and also disqualification and be banned from acting as a Director for a period of time.
2.What is a CCJ? And what can be done if I have one?
A CCJ stands for ‘County Court Judgement’, if you owe someone money and you are not responding to them or refusing to pay, then they can apply through the courts for a CCJ against you to claim the money which is owed to them. If you have a CCJ against you, you have 14 days to respond to the court, if you know you owe the money you will need to arrange payment. If you do not owe the money you can ask the court to set aside the judgement.
3. What is a Winding up Petition?
If you owe a creditor more than £750, they can apply to the court to wind up your company.
4. What does it mean to be wound up?
A creditor can present a petition to the court for a winding up order against your company which could result in Compulsory Liquidation. If your company is wound up it will cease trading and it could lead to director disqualification.
5. What is an adjournment? And how can I get one?
If there is a petition for winding up a company or for bankruptcy a hearing date will be set. The hearing date can be deferred by obtaining an adjournment. Silke & Co can put a Barrister in court on your behalf to seek an adjournment of the petition. This allows you breathing space so you are able to assess the options available to you so you can take necessary action before the next court hearing. Please note it is very important that action is taken before the next hearing as the judge must see some progression and willingness from you.
6.What is the first step when my company gets into financial difficulty?
If your company is experiencing financial difficulties you need to act sooner rather than later. This is because there are different options available to help you rescue your company and/or business. Not all of our clients need a formal insolvency and our trusted partners may be able to offer alternative help from private equity funding through to bridging loans. If you are struggling to come to terms with your difficulties and leave it too late, your options will be limited. If you are unsure of which procedure will benefit your company, get in touch with us and one of our advisers will assess the problems you are experiencing and direct you on the right path.
7. Can I save my Company or is Liquidation the only answer?
Liquidation is not the only answer, if you act in time and don’t leave it too late, Company Voluntary Arrangements and Trading Administrations are just two options available to keep your company trading.
8.What Insolvency options are available to me?
Our website lists and details options available to companies and individuals. See the ‘Corporate Debt’ and ‘Individual Debt’ sections for more information.
9. How long does a Company Voluntary Arrangement last?
A Company Voluntary Arrangement can be for any period up to 5 ½ years, however if less than 5 years it is expected that creditors will be paid 100p in the £. In some circumstances a CVA can finish early if a variation is put forward. (See Question 10).
10. Can you complete a CVA early if circumstances change?
Yes, in certain circumstances. A variation can be proposed to the creditors at anytime, which could end the CVA earlier than expected. The variation is anything the company proposes, but is often a lump sum introduced into the arrangement. The variation proposed may reduce the dividend to creditors, however they will receive their money in a shorter period of time, which is sometimes a plus point for the creditors who are going to vote.
The lump sum is usually introduced by the director from their personal funds, a family member or by way of a third party. The money must not come from the company unless 100p in the £ is being offered and proof must be shown where the lump sum has come from.
A variation cannot be guaranteed, but for a better chance of a variation being accepted the company and its director must show a level of compliance throughout the CVA. This means making sure returns and payments are submitted to HMRC in a timely manner, and contribution payments are maintained throughout.
If the variation is rejected the CVA will continue under its original terms until it concludes, or until another variation is put forward.
Should the Company be in a position where it is able to satisfy all of its debts included in the CVA in full, plus statutory interest if applicable, then the CVA can be concluded earlier than the specified period in the proposal.
11. Can I become a Director of a new Company if my current Company goes into Liquidation?
Yes, if your company goes into Liquidation you can still become a Director of another company. However, if you set up a company with a similar name within 12 months of the Liquidation there is a procedure that the Director needs to follow (under Section 216 of the Insolvency Act 1986). If this is ignore and the company becomes insolvent a Director could be held liable for the debts incurred, and in some circumstances may face personal action such as bankruptcy, and the loss of personal assets. Disqualification as a Director would be likely in this instance.
12. What is a proxy form? And what are they used for?
A Proxy form is a form that must be completed if a creditor wishes to vote or appoint a representative to vote at a virtual or physical creditors meeting on their behalf.