The service is aimed at company directors facing the possibility of insolvency due to either a deterioration of the business or as a result of unexpected costs or losses.
In such situations directors may be unable to make certain payments as they fall due and may wish to take advice on the options available to them, to avoid wrongful trading or other director misconduct claims.
If directors fail to seek advice when facing insolvency or trading insolvent, they increase the risk of being personally liable to compensate creditors' losses in the event of a subsequent failure of the company.
1. identifying and proposing both typical and creative options in a quick and affordable manner
2. highlighting the implications, risks, and costs of the shortlisted alternatives
3. following through with the implementation of the chosen approach
Capital Agents is highly cost-effective, operating at hourly rates significantly below the charges of traditional insolvency advisory firms which typically fall in the range of £400-£900 per hour for senior advisors.
Client contact will be directly with a senior consultant of Capital Agents with extensive experience in insolvency, restructuring, and turnaround.
In addition to providing traditional insolvency advice, Capital Agents can provide additional outside-the-box options beyond the typical formal insolvency alternatives.
This is achieved by leveraging the practical management background and company director experiences of their executive consultants. Capital Agents thus has a thorough understanding of the challenges, difficulties and desired outcomes faced by directors in similar situations, and can guide directors on the most suitable approach.
The service has three major phases as detailed below.
The objective is to protect the directors from personal liabilities and to increase the chances for the rescue of the business.
We quickly understand the key factors and complexities of the situation, and provide initial advice with the realistic options that are available.
The most appropriate rescue and turnaround options will be evaluated and shortlisted in conjunction with applicable formal insolvency procedures. This will ensure that the business has the best opportunity to continue to trade though the resolution of the insolvency situation.
1. raise awareness about the legal duties of directors in situations of pending or actual insolvency
2. identify the appropriate conditions and limitations to continue trading the business while insolvent without wrongful trading:
3. address the typical risks of statutory demands and winding up petitions
4. raise awareness of the most effective ways to engage and deal with HMRC
In accordance with further instructions from the client, the shortlisted specific approaches will be explored with the relevant details, constraints, and complexities of the situation.
In parallel, advice is provided on reacting to, and following the appropriate procedural steps to respond to, statutory demands or winding up petitions, whether threatened or formally lodged.
Below are lists of typical management-led business rescue and restructuring options as well as formal insolvency procedures that can be considered in detail.
1. amicable restructuring via individual negotiation with key creditors
2. business turnaround approaches:
3. debt refinancing via equity fundraising or issuance of incentivized loan notes
1. Administration
2. Pre-Packaged Sale in Administration
3. Administrative Receivership
4. Creditors’ Voluntary Liquidation (CVL)
5. Members’ Voluntary Liquidation (MVL)
6. Compulsory Liquidation
7. Company Voluntary Arrangement (CVA)
8. Restructuring Plan – Part 26A
9. Moratorium – Part A1
Once course of action is decided upon, Capital Agents is able to support with hands-on execution work with quick and cost-effective turnaround.
1. drafting formal communication
2. ensuring suitable evidence preservation and record keeping such as:
3. advising and capturing evidence on balancing the interest of creditors vs shareholders considering:
4. responding to and managing threats of legal actions or ongoing proceedings, as well as ongoing or pending claims
5. preparing witness statements, evidence exhibits, and court bundles
6. advising on the possible ramifications and impact of the handing over of control of the business to administrators
Where 3rd party specialists are needed, Capital Agents can leverage its network to find the professionals best suited for the particulars of the client and the case.
In situations where formal insolvency procedures require a licensed office holder, Capital Agents can identify and recommend the most suitable appointment taker / administrator based on the size and complexity of the business, the flexibility and agility required, as well as the costs involved.
When the client is pending formal legal action, especially court hearings, Capital Agents can propose cost-effective solicitors for the final procedural steps of court filings and court hearings coordination, along with an appropriate barrister with case relevant experience, who can support to validate that all relevant case law has been identified and considered. Capital Agents can also source specialist solicitors who may be needed in a limited capacity for very specific legal uncertainties.
Control of the business is handed over to a licensed administrator who acts as an officer of the court. An administration offers the context to formulate and refine a strategy for resolving the insolvency, by creating a statutory moratorium which protects the company from creditors, who cannot act against the company without the permission of the court.
A sale of all or part of the company’s business or assets negotiated before an administrator is appointed and executed immediately or very shortly after the start of the administration. In certain circumstances the sale may require the approval of certain creditors or that of the court.
Insolvency process initiated by a secured creditor (usually a bank or a financial institution), also known as a debenture holder, where a receiver is appointed following an insolvency event or other breach of the terms of the debt facility, who has access to all assets and business of the company and acts only in the interest of the charge or debenture holder.
A formal process initiated by directors to appoint a liquidator for the company following a meeting of the creditors where the liquidation and the the proposed liquidator are agreed.
Considered a cost-effective way to close a company that is still solvent, an MVL is a formal process that can be used to wind down the operation of a solvent company or a post-administration company when reaching a natural end of a lifecycle. In such situations, creditors can expect to obtain 100% of debts in return.
A common corporate insolvency process, a compulsory liquidation is usually the effect of a court issuing a winding up order as a follow-up for a winding up petition hearing. Although typically initiated at the request of creditors as a final procedural attempt of recovering unpaid liabilities, an application to the court can also be made by directors.
Allowing the company to introduce delays or even certain compromises in paying off debts, a CVA is a legally binding arrangement between a company and its creditors. The agreement must be approved by 75% in value of the creditors voting and by more than 50% of the company’s shareholders.
Introduced in 2020, a Part 26A restructuring plan is a new “cross-class cram down” tool that can be used to rescue companies from financial difficulty via a court approved order by reducing or postponing the debt of the company as well as make other structural changes within the company which will be binding on all creditors and shareholders. Capital Agents have specialist knowledge and leading experience dealing with part 26a restructuring plans (for more details, please click here).
A Part A1 moratorium can be used to give the company temporary protection from insolvency and legal proceedings which are suspended, while the company attempts to rescue itself as a going concern. After an initial period of 20 business days, the moratorium can be extended to a year or more depending on the consent obtained (from the creditors or from the court).
