Ending The Company
Administrative Receivership Procedure
If a company has borrowed money secured by a floating charge, the debenture holder will then appoint an administrative receiver.
The administrative receiver will then take control of/deal with the company's assets. The company may continue to trade if the debenture permits. The administrative receiver will then report to IS on directors' conduct under CDDA.
Finally one of four things will happen. Either, the company will be sold as a going concern, or its assets will be sold separately; or control of the company will be returned to directors and shareholders; or an adminstration order will be made; or the company will go into compulsory or voluntary liquidation.
Receivership is when the debenture holder (often a bank) will appoint a receiver who's duty is to assess how much the company and its assets are worth. The main goal of the receiver is to recover the value of the lenders security, so the receiver is allowed to realise the company's assets by continuing to trade. Alternatively the company may be sold off to recoup the value.
Liquidation only happens when there is absolutely no hope of finding a solution where the company can continue to trade. If a business is unprofitable and can find no way of trading profitably, the company will be put into compulsory or voluntary liquidation.
If the director/company decides to cease trading, this is called creditors voluntary liquidation. This involves a meeting where creditors and company members meet and appoint a liquidator (which the creditors must agree with). The liquidator will then set about realising the company's assets in order to fairly distribute them to creditors and shareholders.
If a creditor winds up a business, this is called compulsory liquidation. What many businesses don't realise is that any creditor who is owed £750 or more can instigate this action by presenting a petition against the company to a court. An official receiver is than appointed as liquidator but a licenced insolvency practitioner can be appointed at a later date.
The only other type of liquidation is members voluntary liquidation which only applies to solvent companies that are able to pay their debts in full, and is generally used in order to restructure a company. Directors must swear an affidavit to assure creditors that the company can clear its debts within one year. A licenced insolvency practitioner is then appointed to carry out the members voluntary liquidation.
Business failure
Business failure: Business failure: Business failure
Business failure: How to reduce business risk
Business failure: Reasons for business failure
Business failure: Rescue company
Business failure: End company
Business failure: What are a directors responsibilities
Business failure: What happens to your employees?
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