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Corporate rescue - Coggle Diagram

- - - - Rescuing the company as a going concern
      - Achieving a better result for the company's creditors as a whole than would be likely if the company were wound up
      - Realising property in order to make a distribution to one or more secured or preferential creditors
  - - - An administrator must be a qualified insolvency practionier
      - A person cannot generally be appointed as administrator of a company that is already in administration
      - A person cannot generally be appointed as administrator of a company that is in liquidation
    - - Appointment by the company or its directors
        
        The company
        
        This power of appointment is exercised by the members passing an ordinary resoution
        
        The directors
        
        Providing that the majority of the directors agree to the appointment
        
        Neither the company nor its directors can appoint an administrator
        
        Within 12 months of the ending of a previous administratior
        
        Within 12 months of the ending of a moratorium which failed to result in a CVA being in force
        
        If
        
        A petition to wind up the company has been presented and has not yet been disposed of
        
        An administrative application has been made and is not yet disposed of
        
        An administrative receiver of the company is in office
        
        Procedure
        
        The company or its directors must provide at least 5 business days notice of their intention to appoint an administrator to
        
        Any person who could appoint an administrative receiver
        
        Any person who could appoint an administrator by virtue of being a qualifying floating chargeholder
        
        This notice must be filed with the court along with other specified documentation. The person appointing the administrator must also file with the court a notice of appointment
      - Appointment by a qualifying floating chargeholder
        
        The holder of a qualifying floating charge over the company's property can appoint an administrator
        
        A floating charge will qualify if
        
        The instrument that created the charge states that the chargeholder can appoint an administrator
        
        The charge on its own or together with other security help by the chargeholder covers the whole or substantially the whole of the company's property
        
        A qualifying floating chargeholder will not be able to appoint an administrator if
        
        The floating charge in question is not enforeable
        
        A provision liquidator has been appointed or an administrative receiver is in office
        
        A qualifying floating chargeholder must provide at least 2 business days written notice to any prior holder of qualifying, floating charge unless the prior holder has consented in writing to the administrator being appointed
        
        The qualifying floating chargeholder must file a notice of appointment with the court. The appointment of the administrator will take effect once this notice has been filed
      - Appointment by court order
        
        The court can make an administration order to appoint a person as administrator
        
        The court can only make an administration order following an application to the court which can only be made by specified persons
        
        The company, the directors or one or more creditors
        
        The supervisor of a CVA
        
        The liquidator of the company
        
        The FCA
        
        The court will only make an administration order if 2 conditions are satisfied
        
        The company is unlikely to be able to pay its debts
        
        The administration order is reasonably likely to achieve the purpose of administration
  - - - The winding up of a company would frustrate the administrator's ability to fulfil the purpose of administration
      - A windi up petition will be
        
        Dismissed if an administration order is made
        
        Suspended if an administrator is appointed by a qualifying floating chargeholder
    - - When a company enters administration by virtue of an administration order, then any administrative receivers will vacate office
    - - No resolution may be passed for the winding up of the company and no order may be made for the winding up
    - - Unless the consent of the administrator or permission of the court is obtained
        
        No step can be taken to enforce security over the company's property
        
        No step can be taken to repossess goods in the company's possession under a hire purchase agreement
        
        No landlord cannot exercise a right of forfeiture by re-entry
        
        No legal process may be commenced or continued against the company or its property
    - - Prior to a company entering administration, a company can be wound up or legal processes instigated. This could serve to frustrate the purposes of administration
      - To combat this, IA1986 provides for an interim moratorium which applies
        
        Where an administration application has been made and the application has not yet been granted or dismissed or the application has been granted but not yet taken effect
        
        In the time between a qualifying floating chargeholder filing a notice of appointment with the court up until
        
        The date of the appointment of the administrator taking effect
        
        5 business days following the filing and no administrator has been appointed
    - - The directors do not automatically vacate office when a company enters administration
      - The powers of directors are suspended as IA1986 provides that the company and any officer cannot exercise managerial power without the consent of the administrator
  - - - The company has sufficient property to pay each creditor in full
      - The company has insufficient property to enable a distribution to be made to the unsecured creditors
    - - The qualifying decision procedure with the details of this procedure to be decided by the administrator
      - The deemed consent procedure, under which the proposal will be approved unless 10% of the creditors in value object to the proposal
    - - Terminate the administrators appointment
      - Adjourn the hearing conditionally or unconditionally
      - Make an interim order
      - Make an order on a petition for winding up
      - Make any other order that it thinks appropriate
  - - - Applying to the court for an order
      - Can be extended once for up to one year by obtaining consent of each secured creditor and if the company has any the unsecured creditors
    - - The administrator can also apply to the court if they think that
        
        The purpose of the administration cannot be achieved
        
        The company should not have entered administration
        
        The company's creditors make an application
      - If the administrator thinks that the purpose of administration has been sufficiently achieved they can file a notice with the court and Registrar
      - A creditor may apply to the court for an order ending the appointment of the administrator if they can show that the motive for appointing the administrator was improper
      - Where a company in administration is the subject of a winding up petition in the public interest, the court will either order
        
        The administrators appointment to cease
        
        The administrators appointment shall continue to have effect
      - If the administrator of a company thinks that the company has no property to distribute, they should send a notice of that effect to the registrar. The registrar will register the notice and 3 months after, the company is deemed to have disolved
- - - - The company's directors if not in administration or liqudiation
      - The administrator
      - The liquidator
  - - - The proposed CVA has a reasonable prospect of being approved and implemented
      - The proposal should be considered by a meeting of the company and the creditors
      - The date, time and place at which he proposes a meeting should be held
  - - - The nominee must invite the company's members to a meeting to consider the proposed CVA to obtain approval. The members need to be provided with 14 days notice and will approve the proposal if a majority of them vote in favour
      - The creditors will approve the proposal by way of a qualifying decision procedure. The details of this procedure will be determined by the nominee. Alternatively the deemed consent procedure can be used under which the proposal will be approved unless 10% of the creditors in value object to the proposal
    - - Within 28 days of the report of the meeting being given to the court, a nominee liquidator or administrator or anyone who had a right to vote as a member or creditor can apply to the court on the ground that
        
        The CVA unfairly prejudices the interests of a creditor, member or contributory of the company
        
        There has been some material irregularity at or in relation to the meeting or the decision procedure
      - If the court agrees with the applicant, it can
        
        Revoke or suspend any decision approving the CVA
        
        Give directions for a further meeting of the company to consider a revised proposal
        
        DIrect any person to seek a decision from the creditors as to whether they approve the revised proposal
  - - - A company in administration
      - A company that is being wound up
      - A company that is already to a CVA
      - A company that has had a moratorium in force at any time during the previous 12 months
    - - The proposed CVA has a reasonable prospect f being approved and implemented
      - If the company is likely to have sufficient funs available to it during the proposed moratorium to enable it to cary on its business
      - The proposed CVA should be considered by a meeting of the company and creditors
    - - No petition may be presented to win up the company and no resolution may be passed to wind up the company
      - No meeting of the company can be called except with the consent of the nominee or leave of the court
      - No administrator can be appointed by the company, its directors or by a qualifying floating chargeholder nor can an administrative receiver be appointed
      - No other steps may be taken to enforce any security over the company's property or to repossess goods in the company's possession under any hire-purchase agreement except with the leave of the court and subject to such terms as the court may impose
- - - - A major advantage of administration is that it provides the company with a moratorium (a period within which a winding up petition cannot be brought and the creditors cannot enforce their security)
      - A more limited moratorium is also available in relation to certain company voluntary arrangements
      - The government has proposed to provide a moratorium to any company that has a legitimate reason for seeking protection, this will be determined based on the financial state of the company, particuarly whether the company will become insolvent if action is not taken
      - If the moratorium is granted it will be supervised by an insolvency practionier known as the monitor
      - The moratorium will initially last for 28 days but can extended for a further 28 days, in certain cases it may be possible to extend the moratorium further
    - - One notable disadvantage of a CVA is that it cannot affect the rights of secured creditors without their consent
      - The government has decided that a more flexible restructuring plan is needed that can bind all creditors
      - The plan will be available to both solvent and insolvent companies but some companies will be excluded
      - The terms of the plan will be for the company to determine with the process for entering into the plan being similar to that for a scheme of arrangement
      - In order for the plan to come into effect, ti will require the approval of at least 75% in value of the company's creditors within each class