Hello and welcome back for the next instalment in our insolvency blogs.
This blog is a follow up to our last on County Court Judgement enforcement options. This week we look at the specific ways in which you can protect against them.
So what steps can you take to protect your Company if a creditor seeks to enforce a County Court Judgment?
If your Company has been the recipient of a CCJ then you must act quickly to ensure that the creditor does not take any of the actions outlined in last week's blog as it may terminally cripple your Company's ability to operate. The formal insolvency options are therefore as follows:
Creditors Voluntary Liquidation
The relevant section in the Insolvency Act 1986 is section 183, which is regarding "The Effect of Execution or attachment". Essentially the section states that "if a creditor has issued execution against the goods or land of a Company...and the Company is subsequently wound up, he is not entitled to retain the benefit of the execution or attachment against the liquidator unless he has completed the execution before the commencement of the winding up".
The key points from this section are "completion" of the execution and "commencement of the winding up". In that regard completion is understood to be when the money from the sale of the Company's assets is received by the instructing creditor. In addition, in terms of a Creditors Voluntary Liquidation, winding up is commenced as at the date a meeting is called to place the Company into liquidation.
What this means, is that should a sheriff or bailiff have seized assets of the Company, a Director can ensure they are not sold if they decide to place the Company into Creditors Voluntary Liquidation and sign the relevant paperwork immediately. Whilst the Company will be entering into Liquidation, the jobs and business in the Company can be saved by way of a phoenix Company. More information on this can be found by following the link.
Company Voluntary Arrangement ("CVA")
Another option is a Company Voluntary Arrangement ("CVA") with a "moratorium" to prevent creditor action.
A CVA is an agreement with the Company's creditors to pay the creditors over a period of time. If the Company cannot afford to pay the debts in full, the offer to the creditors could be for payment in part.
A moratorium would afford the Company a "stay of execution" against any creditor enforcement until the result of a vote on the CVA by the creditors is concluded.
More information on CVAs and moratoriums can be found by following the link.
Another option open to the Company when facing enforcement action is to place the Company into Administration.
As Administration automatically provides the Company with a moratorium and therefore would safeguard the Company's assets immediately.
Once a Company is in Administration, the Administrators will be in control of the Company and can decide whether to continue to trade the business with a view to selling it as a going concern or cease trading and look to sell the assets of the Company.
The Directors of the Company would be able to buy the business of the Company and preserve the jobs of the the employees, as long as theirs was the best offer.
More information on Administrations and moratoriums can be found by following the link.
As always, Should you wish to discuss CCJs, their impact on your Company and the options open to your Company in more detail, please do not hesitate to get in contact. Telephone: 01326 340 579, Email: firstname.lastname@example.org