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R E Murphy & Co is a boutique specialist insolvency firm with a history of providing excellent service to their clients.
WHAT ARE THE AVAILABLE OPTIONS?
General Information
There are a number of options in actual or likely insolvency that can be pursued depending on the particular circumstances of each situation.
The following is a summary of the available options, the nature of the appointment, the aim of the appointment and the method under which the various appointments can be made.
VOLUNTARY ADMINISTRATION (“V.A.”)
Nature
This form of appointment exists to provide for the administration of an insolvent company in a way that maximises the chance of the company, or as much as possible of its business, continuing in existence. If this is not possible, the object is to result in a better return for the company’s creditors and members than would result from immediate winding up.
A V.A. involves the appointment of a registered Liquidator as a Voluntary Administrator of the company. The task of the Administrator is to assess the company’s affairs in a comprehensive report and make a recommendation to the company’s creditors that one of the following options be adopted:
(a) the company execute a Deed of Company Arrangement;
(b) that the administration should end;
(c) that the company be wound up.
The creditors then resolve that one of the above options be adopted thus determining the company’s future.
Who Can Appoint
The appointment of a Voluntary Administrator may be made by:
(a) the Directors of the company, after resolving that the company is insolvent or is likely to become insolvent at some future time and an Administrator should be appointed;
(b) a Liquidator or Provisional Liquidator in writing if he or she thinks the company is insolvent or is likely to become insolvent at some future time; or
(c) a Chargeholder who is entitled to enforce a charge over the whole or substantially the whole of the company’s property in writing.
The consent in writing of an Administrator must be obtained prior to any appointment being made.
Timing
A V.A. commences immediately after giving notice in writing to the practitioner of his appointment as Administrator.
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VOLUNTARY LIQUIDATION
Voluntary Liquidation serves to wind up the affairs of the corporation.
There are two types of Voluntary Liquidation administrations:
1. Members’ Voluntary Liquidation; and
2. Creditors’ Voluntary Liquidation.
Members’ Voluntary Liquidation
Nature
This administration serves to wind up the affairs of a solvent corporation and provides for a fair and equitable distribution amongst the corporation’s members of the surplus after paying all creditors.
Who Can Appoint
The appointment of a Liquidator is made following the passing of a special resolution of the members of a company.
Timing
The meeting of members may be held after at least one days’ notice of the meeting is given to members (with 95% of members’ consent) or at least 21 days notice if 95% of members do not consent to the short notice period.
Creditors’ Voluntary Liquidation
Nature
This administration serves to wind up the affairs of a corporation and also serves to provide for a fair and equitable distribution of the corporation’s property amongst its creditors, where the company is insolvent.
Who Can Appoint
The appointment of a Liquidator is made following the passing of a special resolution by the members of the company, which is subsequently ratified by a meeting of the creditors of the company.
Timing
The same timing requirements apply as shown above with respect to the members’ meeting. The meeting of creditors is usually held after the meeting of members, with at least 7 days’ notice of the creditors’ meeting being given.
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PROVISIONAL LIQUIDATION
Nature
Provisional Liquidation exists to allow interim control over the affairs of the company after an application to wind up the corporation has been filed in the Court, but before the hearing of the winding up application has taken place or has been concluded.
The appointment may also take place where:
(a) there is an appeal against the winding up application and a decision on the appeal has not been reached; or
(b) in other special circumstances, where there is a risk of dissipation of assets or an internal party dispute, where the company is insolvent and the directors and or shareholders seek this course of action.
Who Can Appoint
Parties who are able to seek the appointment of a Court Liquidator are also able to seek the appointment of a Court appointed Provisional Liquidator.
Timing
After a Winding Up Application has been filed with the Court, but before the hearing of the Winding Up Application. This can take place within a few days of action commencing.
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Nature
Official or Court Liquidation exists:
(a) to wind up the affairs of the corporation;
(b) to provide a fair and equitable distribution of the corporation’s property, amongst its creditors, and should there be a surplus available amongst its members; and
(c) in the case of insolvent corporations, to permit an examination to take place of the circumstances giving rise to the Liquidation, perhaps revealing unfair distributions of property potentially recoverable for the benefit of creditors of the company.
Unlike Voluntary Liquidation where the members/shareholders voluntarily determine to wind up the company’s affairs, Court Liquidation provides an opportunity to force the winding up of a corporation against the wishes of corporate management or ownership. This facility is particularly helpful to creditors and oppressed minority shareholders. When a company is placed in Liquidation, a Liquidator is appointed to the company to administer its affairs, realise assets, and if applicable pay dividends.
Who can Appoint
The appointment of an Official Liquidator can be made by a number of parties, including creditors, members or shareholders. The most common applications are made by a creditor of the company after the company has failed to comply with a Creditor’s Statutory Demand for Payment of a debt.
Timing
The company has 21 days in which to defend or comply with the Creditor’s Statutory Demand. If the company does not lodge a defence or comply with the notice, a winding up application may be brought by the creditor within 3 months of the service of the Creditor’s Statutory Demand on the company.
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RECEIVERSHIP
Nature
Receivers & Managers are generally appointed as independent persons to collect or make safe income or assets or both, usually for the purpose of realisation on behalf of a particular creditor who holds a charge over the company, or to protect the contractual rights of the parties. If a Receiver & Manager is appointed to enforce a debenture, for example, the Receiver & Manager collects and sells the property secured by the debenture on behalf of the debenture holder and distributes the proceeds to it.
Who Can Appoint
The appointment of a Receiver and Manager is most commonly made by a secured creditor who holds either a fixed or fixed and floating charge over the assets and undertaking of a company. A Receiver & Manager may also be appointed by the Court.
Timing
A secured creditor may appoint a Receiver & Manager to a company after a reasonable time has been given to the company to comply with a Notice of Demand for payment of the debt and the company has not complied within the time. In practice, if it is not specified in the charge documents, the time allowed is usually one week.
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NON-CORPORATE RECEIVERSHIP
Nature
The nature of an appointment of a Receiver or Receiver & Manager to a non corporate entity is generally similar to an appointment to a corporate entity. The role is generally to realise the assets of the entity in order that the funds can be distributed amongst the various parties who control/own the entity.
Who Can Appoint
An appointment of this type usually results from a dispute between the various parties who control an entity. Generally, any person who has an interest in the entity could seek the appointment of a Receiver either by way of a Court Order or by way of an agreement reached between the various parties.
Timing
The timing of an appointment of this type will depend on whether it is a Court appointment, where a formal application is required, or whether the appointment results from a negotiated settlement. Once an application to the Court is made, it is likely to be considered by the Court quickly.
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BUSINESS INVESTIGATIONS AND REVIEW
R E Murphy & Co provides a service of business investigation and review which can be used for a variety of purposes:
• internal review of profitability or the financial health of a business;
• To a debtor company seeking assistance to implement a turn around strategy, cutting costs and restoring profitability;
• Investigation accountant’s reports to creditors (both secured and unsecured);
• Realisation of assets;
• Restructuring/acquisition of businesses/assets;
• Assessment of lender’s security position;
• Assessment of a business to support a lender’s or investor’s review of a project.
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CONSULTANCY AND ADVISORY SERVICES
R E Murphy & Co offers a range of consultancy advisory services, including:
• To a creditor seeking information on the insolvency process;
• Representation at creditors meetings and preparation of documentation;
• Organisational structure review;
• Negotiations with creditors to arrange debt moratorium or reschedule debt;
• Advising on security issues, including charges, mortgages and retention of title;
• Providing recovery strategies to debtors or creditors;
• Reviewing and report on debtor ledgers for recovery purposes.
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TRUSTEESHIP
R E Murphy & Co is able to act as a Court Appointed Trustee in which role control may be taken and tasks undertaken in accordance with the directions contained in a court order. Such an appointment usually arises as a result of dispute or conflict between parties, where insolvency is not involved.
WHAT SHOULD BE DONE NOW?
Requests for the firm to act are often made by directors or management of a company experiencing difficulties or by accountants or solicitors acting for them. However, creditors themselves also can initiate an appointment of the firm’s principals in their capacities as either a registered Official Liquidator, or a Registered Liquidatorn or otherwise, where the recovery of debt is in doubt and assets of the debtor company may be at risk.
Initial consultations with the relevant parties and their advisers are offered free of cost to allow the position to be assessed and to consider alternative action which may be taken.
At that time, further clarification of the types of appointments may be discussed to allow the parties to achieve the best results from the available options.
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