CAVANAGH KELLY BELFAST OFFICE

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1 CAVANAGH KELLY BELFAST OFFICE

2 Facing up to your financial future is easier when you have the experience, understanding and expertise of highly qualified professionals at your side. Cavanagh Kelly has many years of hands-on practical experience in advising on corporate restructuring, business recovery and insolvency procedures. Our experienced team of business advisors will work with you in identifying the best solution in your individual set of circumstances and help you find a way through. DUNGANNON: BELFAST: follow us on:

3 rescue PROCEDURES Our corporate recovery team has enabled many companies in financial difficulty to restructure their business, renegotiate finance and return to operational trading. An informal restructuring arrangement outside of a formal insolvency process often delivers the best result. Where a formal insolvency process is required one of the following legal structures will be used: CORPORATE RECOVERY Administration Administration can be used to save a company where the company can be rescued as a going concern. This process is quick and efficient and can often be set in motion without any need for court involvement. An administrator can be appointed by the directors (subject to the agreement of any lender with a legal charge) by a lender or creditor. Once appointed, creditors must be presented with the rescue proposal within 8 weeks. A 50% majority of creditors by value must approve the proposal if it is to proceed. During the period of preparation of the proposal, creditors are not permitted to instigate or proceed with any legal action to recover their debts. Company Voluntary Arrangement (CVA) This process is also creditor driven and a 75% majority IN VALUE is required to approve the arrangement. A proposal is filed in court and then sent to creditors. During this interim period, the company is allowed to continue trading under the supervision of a nominee. The proposal normally involves a write off of part of the debts owing to creditors. Once approved by the creditors, the nominee becomes the supervisor of the arrangement. PERSONAL RECOVERY Individual Voluntary Arrangement (IVA) This is similar to a CVA - a nominee is appointed by the debtor who helps prepare a proposal to be submitted to court for granting of a moratorium. This proposal is then put to creditors for approval. A 75% majority IN VALUE is required for approval. If approved, the nominee usually becomes the supervisor of the arrangement. It is possible to propose an IVA even if a person has been made bankrupt!! Partnership Voluntary Arrangement (PVA) Partnerships have several rescue options i.e. by way of an IVA (normally a series of interlocking IVA s), as a partnership (PVA) or as an unregistered company via a CVA, or alternatively, through administration. Informal Arrangements The above rescue procedures are formal legal processes. Sometimes a rescue can be effected in an informal way without the need for court involvement. Creditors must however still be involved. Whilst these informal procedures can work well in certain limited situations, there are nevertheless risks associated with them and professional advice must be sought.

4 insolvency PROCEDURES It must be recognised that when business problems arise not all can be resolved by rescue procedures. In these circumstances the following options are available: COMPANY INSOLVENCY Administration In some cases administration will be used to get a better return for creditors through workout of a debtor book and / or managed disposal of trade, stock and other assets prior to ceasing to trade. Subsequently, the company will move into liquidation or be dissolved. Creditors Voluntary Liquidation (CVL) Where a company is insolvent and has no hope of rescue, the directors must pass a resolution to wind it up (in accordance with company law). A meeting of creditors is called and a liquidator appointed to realise the assets and pay creditors in the prescribed order. Court Liquidation In these circumstances the company is wound up by order of the court, often following a winding up petition by a creditor. However, shareholders can also petition for a court winding up, in order to help protect their position and the assets of the company until a liquidator is appointed. The Liquidator is normally the Official Receiver. PERSONAL INSOLVENCY Bankruptcy Bankruptcy orders are normally made following the presentation of a petition by a creditor but increasingly petitions for bankruptcy are being made by the debtors themselves. Before a person is made bankrupt by a creditor, a bankruptcy petition must be presented to the court for a debt in excess of 750. Once a bankruptcy order is made, a trustee is appointed who, after allowing for basic living needs, realises the remaining assets for the benefit of the creditors. Once bankrupt, a person s assets vest in the trustee and the bank account is normally frozen. Trading can continue if the trustee agrees.

5 solvent WINDING UP Occasionally, a company will have come to the end of its operational life and still retains funds. The members will then have to decide on the most tax efficient way to extract funds from the company. This can often be implemented by way of a Members Voluntary Liquidation. WINDING UP OF SOLVENT COMPANIES Members Voluntary Liquidation (MVL) A Liquidator is appointed by the members and the assets are distributed in cash or in specie according to their rights as dictated by the company s Memorandum & Articles of Association. Timely tax planning is usually a critical part of a solvent winding up. Application for strike offs (Section 1003 Companies Act 2006) Sometimes where a company has ceased trading and has no assets or liabilities, the shareholders can make an application to the Registrar of Companies for strike off. Where a company has residual assets, HMRC may give clearance for a capital distribution under Extra Statutory Concession (ESC) 16. Under new rules introduced in March 2012, companies with assets of more than 25,000 cannot avail of Extra Statutory Concession (ESC) 16 and must formally wind up by means of members voluntary liquidation. Reconstructions We also specialise in drawing up and implementing Article 96 schemes whereby a company reconstruction is achieved via a winding up and the shares distributed to shareholders in new companies thus preserving the continuity of trading and tax reliefs. RECEIVERSHIPS A receiver is appointed by a lender to take control of charged assets and manage those assets to maximise the return to the lender, usually a bank. Fixed Charge Receivers Fixed Charge Receivers are appointed to take control of property (assets held under fixed charge). The powers of the receiver will be as set out in the charge document; this may include the power to sell the property or may be restricted to collecting rent and insuring the property. The FCR does not have to be a licensed Insolvency Practitioner. Administrative Receivers Administrative Receivers are appointed to take control of assets held under floating charge - they can only be appointed where a floating charge was granted by a company prior to 27 March 2006 in Northern Ireland. The Receiver s responsibilities are primarily to the appointor (usually a bank), although a report and notice of a creditors meeting must be issued to creditors within 3 months of the appointment.

6 ADVICE & GUIDANCE Cavanagh Kelly has a fully dedicated team of specialists who provide professional advice and guidance in respect of business recovery and insolvency procedures. The team is led by Insolvency Practitioners Sean Cavanagh and Gerard Gildernew. THE INSOLVENCY TEAM: SEAN CAVANAGH PARTNER B.A. Dip. Ed. F.C.A. M.A.B.R.P. E: [email protected] GERARD GILDERNEW PARTNER B.Sc. (Hons) F.C.A. M.A.B.R.P. E: [email protected] RACHEL FOWLER DIRECTOR B.Sc. (Hons) M.Sc. A.C.A. E: [email protected] HOW WE CAN HELP Contact our team Whatever the solution - we are here to help. If you would like to discuss your requirements or learn more about any of the services available, we will be happy to arrange an initial consultation. Contact our team: DUNGANNON OFFICE t: f: BELFAST OFFICE t: f: e: w: [email protected]

7 THE RIGHT ADVICE AT THE RIGHT TIME: At Cavanagh Kelly, we work with companies and individuals to understand your specific requirements - we have practical experience and involvement in the following areas: Voluntary arrangements : IVA s, PVA s, & CVA s Administrations Receiverships Informal rescues Representing creditors at insolvency meetings Solvent & insolvent liquidations Directors responsibilities in insolvency Pre-insolvency advices Bankruptcy - creditor s & debtor s petitions Corporate restructuring Insolvency planning / mitigation DUNGANNON: BELFAST:

8 cavanagh kelly DUNGANNON Northland Row Dungannon BT71 6AP T F OUR SPECIALIST SERVICES INCLUDE: Audit & Business Advisory Business Recovery & Insolvency Corporate Finance Forensic Accounting & Investigations Growing Business Support Management Consultancy & Business Planning Personal Insolvency & Bankruptcy Taxation PARTNERS: J.J. Cavanagh B.A. Dip. Ed. F.C.A. M.A.B.R.P. D.A. Kelly B.Sc. (Econ) F.C.A. M.G. Gildernew B.Sc. (Hons) F.C.A. M.A.B.R.P. BELFAST Scottish Provident Building 7 Donegall Square West, Belfast BT1 6JH T F MAGHERAFELT 17 Church Street Magherafelt BT45 6AP T F E W [email protected] Whilst every effort has been made by Cavanagh Kelly to ensure the accuracy of the information contained in this leaflet it cannot be guaranteed and neither Cavanagh Kelly or any related entity shall have any liability to any person who relies on the information thereon.