WHAT
HAPPENS TO A COMPANY IF IT BECOMES INSOLVENT?
Insolvency law (chiefly the Insolvency
Act 1989 ["the Act"]) govern's how companies
go out of business or recover from crippling
debt.
An insolvent company, ("the debtor"),
might use either an Administration Order or
a Company Voluntary Arrangement ("CVA") to
"reorganise" its business and try to become
profitable again. Management continues to
run the day-to-day business operations in
the case of a CVA and an Administrator appointed
by the Court will run a company in the case
of an Administration Order. If a company goes
into liquidation either voluntarily or is
formally wound up by the Court, the company
stops all operations and goes completely out
of business. A liquidator may be appointed
to "liquidate" (sell) the company's assets
and the money is used to pay off the debt,
which may include debts to creditors and investors.
Alternatively and finally the debtor may have
an Administrative Receiver ("a Receiver")
appointed under a floating charge. |
