Insolvency Flashcards
What are the different types of insolvency?
- Company Voluntary Arrangements (CVAs)
- Administration
- Winding up (of the party, company, or compulsory liquidation)
- Administrative receivership
- Voluntary liquidation
What is insolvency?
When a company can’t pay their debts on time or when their liabilities are greater than their assets.
What is a Company Voluntary Arrangements (CVA)?
When a business is struggling financially but isn’t necessarily bankrupt yet. The company’s directors start the process by proposing a plan to repay creditors a portion of what they’re owed.
What is Administration?
When a struggling company is managed by an appointed administrator to keep trading, protect assets, and either save the business or sell its assets for the best value, often offering a better outcome than liquidation.
What is Winding up of the Party/Company or Compulsory Liquidation?
Compulsory liquidation happens when a company can’t pay its debts, and a creditor asks the court to close it down by issuance of a winding up order. If approved, the company stops trading, and a liquidator sells its assets to repay debts.
What is Administrative Receivership (or Receivership)?
Administrative receivership happens when a company breaks the terms of a loan, usually with a bank. The bank can then appoint a licensed expert, called a receiver, to take control of the company and recover the money owed.
What is Voluntary Liquidation?
When a company chooses to close down, even if it can still pay its debts. The directors decide that the company can’t keep going because of heavy debts. They appoint a liquidator to sell the company’s assets and pay off debts, and the company stops trading.
