[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN ENGLAND] 31
ESTABLISHING A BUSINESS ENTITY IN ENGLAND This chapter gives a brief summary of insolvency and rescue procedures for companies and individuals under the law of England and Wales. The law in Scotland and Northern Ireland is different in certain respects. 1. What is the main procedure for companies? 1.1. For companies with no ongoing business to rescue, the most likely procedures are liquidation or dissolution. 1.2. For companies with a business to rescue the main procedure is administration (increasingly applied as a pre-pack ). However, other options include procedures to compromise a company’s liabilities- company voluntary arrangement (or CVA ), schemes of arrangement , or restructuring plans. Standalone moratoriums are also available. 1.3. For secured creditors there is the additional remedy of receivership or mortgagee sales. The English courts frequently apply these procedures for companies incorporated outside of the UK. Additional considerations arise with cross-border cases on which we can advise further if required. 2. How does liquidation work? 2.1. Types of liquidation: Liquidations can be started by application to court made by creditors, directors, shareholders, and certain other interested parties (known as compulsory liquidation ) or by
those cases where directors intend to pay all creditors in full (known as members’ voluntary liquidations ) or those where it is not intended to do so ( creditors’ voluntary liquidations ). 2.2. Office holder: 2.2.1. With a members’ voluntary liquidation, from the time of the members’ resolution to put the company into liquidation, management of the company is passed to an insolvency practitioner. That is an independent regulated professional who is qualified and authorised to take appointments of this nature. 2.2.2. With a creditors’ voluntary liquidation, the choice of insolvency practitioner must be approved by a vote of creditors which will follow the members’ resolution to put the company into liquidation. 2.2.3. With a compulsory liquidation, on the making of the court order to put the company into liquidation, the official receiver (a government department) would be appointed. An insolvency practitioner may be appointed at the request of creditors or by the official receiver, if felt appropriate, to take over conduct of a compulsory liquidation (usually because there are assets to realise or litigation to pursue). 2.3. What will the liquidator do? The liquidator will go through a statutory procedure to realise assets, and
resolution of members (known as voluntary liquidation ). Voluntary liquidation is further divided between
ILN Corporate Group – Establishing a Business Entity Series
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