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 will result in Compulsory Liquidation. If your company is wound up it will have to cease trading and it can lead to director disqualification. This is potentially the worst thing that can happen to a director and their company, therefore it is much better to avoid this if at all possible and take action sooner rather than later.
5. What is an adjournment? And how can I get one?
If you owe a company or an individual money they can petition to wind up your company or petition for your bankruptcy through the courts. 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. How can I reduce the risk of my company becoming insolvent?
We regularly post helpful tips about how to avoid getting into financial difficulty on Facebook, Twitter and Linkedin. Follow us to make sure you don’t miss out! You can also subscribe to our monthly newsletter by filling in the form at the bottom of this page to receive advice on different Insolvency procedures each month.
7.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 an Insolvency procedure 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.
8. 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.
9.What Insolvency options are available to me?
Our website lists and details all of the options available to companies and individuals. See the ‘Corporate Debt’ and ‘Individual Debt’ sections for more information.
10. How long does a Company Voluntary Arrangement last?
A Company Voluntary Arrangement usually lasts around 5 ½ years or earlier if 100p in the pound can be achieved. In some circumstances a 5 ½ year arrangement can finish early if a variation is put forward. (See Question 11).
11. Can you complete a CVA early if circumstances change?
Yes! A variation can be proposed to the creditors at anytime which could end the CVA earlier than expected. The variation is usually a lump sum added 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 big plus point for the creditors who are going to vote.
The lump sum is usually introduced by the director’s personal funds, a family member or by way of a third party. The money must not come from the company and proof must be shown where the lump sum has come from.
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, this is because they are usually the main creditor!
If the variation is rejected the CVA will continue under its original terms until the next variation is put forward or it is concluded.
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.
12.What will happen if my CVA proposal is rejected?
If your CVA proposal is rejected we will discuss other options which are available to you. You will stand more of a chance of your proposal being accepted by the HMRC if your returns are all up to date.
13. 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 deliberately continued to trade the insolvent company knowing that your company could not afford to pay its debts then it could be classed as wrongful trading and 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.
14. After a business Insolvency how do I start up a fresh company?
Sometimes starting up a fresh company seems like the best option to those who are faced with financial difficulties. You are required to follow all the legal processes when starting up a new company and you will need to make sure that you are able to pay your creditors and suppliers. For tips about how to keep your company trading follow us on Facebook, Twitter and Linkedin.
15. What is a proxy form? And what are they used for?
A Proxy form is a form which is completed if a creditor or member cannot attend the Creditors or Members meetings or wishes someone else to represent them to vote on their behalf at the meeting.