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Compare Insolvency Regimes

TYPE OF INSOLVENCY REGIME

COMPANY VOLUNTARY ARRANGEMENT

CREDITORS’ VOLUNTARY LIQUIDATION

ADMINISTRATION

Do you have to be insolvent?

Yes

Yes

Yes

Who starts the process?

Directors

Directors / Shareholders

Directors and/or Floating Charge holder / Creditors

What is the timeframe to implement?

3 weeks (minimum)

8 days (minimum)

Hours to several weeks

When and is the company protected?

When approved it will bind all pre-CVA creditors

N/A

Moratorium freezes all creditor actions, starts when notice is filed at court

What is the purpose?

Usually the survival of the Company and turnaround

To wind-up a company

Various objectives

What happens to Employees?

Typically remain employed, but some may be made redundant pre-CVA to return the company to profitability

Typically made redundant, however can transfer to the purchaser if there is a going concern sale

Some may be made redundant to enable the company to trade within its means, but if a purchaser buys the business as a going concern, all remaining employees will be transferred.  Otherwise, all will be made redundant

What is the Insolvency Practitioner’s Main Role?

To supervise the arrangement

To dispose assets and wind down the affairs

To manage the company’s business and affairs and to achieve a purpose of the Administration

What are the Insolvency Practitioners powers?

Limited to terms of arrangement

Various: realise assets / disclaim onerous property / bring and defend legal actions / distribute funds to creditors

Various: realise assets / bring and defend legal actions / trade / distribute funds to preferential and secured creditors / distribute the prescribed part to unsecured creditors

Does the Insolvency Practitioner report on the directors’ conduct?

No

Yes

Yes

Can the Directors purchase the Company’s business and assets?

N/A

Yes

Yes

What happens to funds realised by the Insolvency Practitioners?

Applied in accordance with the terms of the arrangement

Applied according to a statutory order of priorities

Applied according to a statutory order of priorities