What is Limited Company Bankruptcy?
Company bankruptcy is a term commonly used when referring to a company becoming insolvent. A bankrupt company means that it has insufficient cash to pay its bills, or the value of its assets is less than its total liabilities. In the UK, the term bankruptcy is only applicable to individuals, including sole traders and members of partnerships.
How do I know if my company is insolvent?
Defined by section 123 of The Insolvency Act 1986, there are two ways of determining if your company is insolvent and bankrupt:
- Cash flow insolvency
When a company is unable to pay its debts as they fall due. - Balance sheet insolvency
The liabilities on the balance sheet outweigh the assets.
Liabilities resulting from legal action, including County Court Judgments (CCJs), that remain unpaid are another indication of insolvency.
How we can help you close your bankrupt company?
If your company is struggling financially and you want to close it, we can help by carrying out the formal liquidation procedures below to close your insolvent company.
- Close your company down via a Creditors’ Voluntary Liquidation (CVL)
A CVL is a liquidation procedure for companies that are insolvent. The process will formally close and liquidate your company, ceasing its trading operations, realising any assets and removing the threat of creditor legal action. If your company has employees, they can claim for redundancy and other statutory entitlements through the government’s Redundancy Payment Service (RPS). The process is final and irreversible. Once completed your company’s unsecured debt will be written off and the company is dissolved, allowing you, the director to move on.
Find out more about Creditors’ Voluntary Liquidation - Close your company down and start again via a pre-pack liquidation
A Pre-Pack liquidation is a type of CVL where the sale of your company’s assets is arranged before liquidation, allowing business operations to continue seamlessly under the purchasing company. The company name may be reused, and employees can transfer under TUPE. Contracts and essential agreements can also be included as part of a sale, ensuring minimal disruption to your business operations. This process eliminates the unsecured debts of your previous company, providing a fresh start free from previous unsecured liabilities.
Find out more about Pre-pack Liquidation
How we can help rescue your bankrupt company?
If your company is insolvent but the business still has the potential to repay its debts, we can carry out the below formal processes to help restructure your company or establish a payment plan.
- Repay your company debts in a payment plan via a Company Voluntary Arrangement (CVA)
A CVA is a payment plan between a company and its creditors that allows you to restructure your company’s unsecured debts, while continuing to trade, by making affordable monthly payments over a fixed period. We start by assessing your company’s financial position, determining a realistic repayment amount. These terms are then proposed to your creditors and if approved, your company enters the repayment plan. When in place, all interest and charges are dropped and creditors in the arrangement cannot take further legal action. The process lasts for up to 5 years and on successful completion, any remaining unsecured debt in the arrangement is written off.
Find out more about Company Voluntary Arrangements - Restructure your company through administration
Administration is an insolvency procedure for companies that are insolvent. Entering the procedure, your company will be in a temporary state of protection by a moratorium, that halts creditor action, including legal proceedings, giving your company the breathing space to continue trading. We will act as administrator and our primary purpose is to rescue your company as a going concern, attempting to restructure and turn it into a leaner more profitable organisation. If rescuing the company isn’t a viable option we will also look at the most appropriate exit strategies from administration, whether that be a potential sale of the business, assets, the whole company, or transitioning to an alternative insolvency procedure.
Find out more about Administration
Personal bankruptcy
Personal bankruptcy is a process for individuals who owe at least £5,000 and cannot afford to repay their creditors. Bankruptcy offers no protection to personal assets, meaning assets such as a house or a car could be sold in order to repay creditors.
How to get in touch with us: The next steps
- Speak with our initial advisers
Make contact with our team, via phone, filling in a form, or online chat. We will assess your circumstances and, if suitable, arrange a free consultation with a consultant to discuss your company’s situation. - Initial assessment
During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or whether alternative solutions better suit your company’s problems - Formally engage with Wilson Field
If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us.
In summary
In the UK, bankruptcy is only applicable to individuals. Company bankruptcy is a term referring to a company which is insolvent. If your company is insolvent, there are various insolvency procedures which your company can enter, whether you want to try and rescue the company, or formally close and liquidate it.
Case Studies
Berks Healthcare Services Limited
Kelly Burton • Healthcare • Administration
Wilson Field has advised on the sale of a Slough-based nursing agency which was bought out of administration, saving all 7 jobs.
Berks Healthcare Services Limited, which traded as Enchor Healthcare Services, specialised in providing healthcare professionals for the public and private sectors.
It supplied registered general and mental health nursing staff, together with unqualified support and ancillary staff, to private hospitals and care homes in the areas local to the company’s offices in Slough, Portsmouth, Birmingham and Luton.
The company, headed up by healthcare professionals, called in administrators from Wilson Field after suffering from a fall in turnover, which left it struggling to meet unsustainable historic debt. It had also been served with a winding-up petition presented by HMRC.
Kelly Burton and Emma Bower were appointed as joint administrators on 14 June 2018 and concluded the sale of the business and assets for an undisclosed sum to an unconnected company, Connect Care & Support Limited, also based in Slough.
Kelly Burton, director and licensed insolvency practitioner at Wilson Field said: “The company had a turnover in the region of £2.9m per annum in 2017. However, this is a very competitive marketplace, which is primarily price-driven and recent changes to minimum wage legislation had also impacted on the company’s potential profit margins.
“As administrators, we sought a purchaser for the business.
“This pre-packaged sale to Connect Care & Support Ltd saved seven permanent jobs as well as numerous temporary agency staff.
“It has also mitigated employee termination claims in the nature of wage arrears, accrued holiday pay, redundancy and pay in lieu of notice estimated to total £29,576 as the liabilities have transferred to the successor business under the TUPE regulations.
“This means the business has a new future moving forward.”
Berks Healthcare Services Ltd was incorporated in January 2015, but can be traced back to February 2007. Enchor Health Care was recognised and registered as Recruitment Consultants providing both permanent and temporary staffing solutions to many different health and social care settings. It also had supported living and rehabilitation centres.
Aristocrat Pet Supplies
Kelly Burton • Retail • Administration
The business and assets belonging to a Sheffield online pet supplies company are up for sale. Aristocrat Pet Supplies, a family-owned and run business, milled its own feed and seed on-site in Sheffield and has been trading for over 25 years selling agricultural raw materials, livestock, textile raw materials and semi-finished goods.
Sheffield-based insolvency specialists Wilson Field were called into the firm after it experienced increasing pressure and competition online. Andy Wood and Lisa Hogg were appointed as joint administrators for the company on 26 January.
Wilson Field is trading the business in the short term with a view to finding a potential buyer for the company based on Holbrook Green Industrial Estate near Sheffield.
Andy Wood, associate director and insolvency practitioner at Wilson Field said:
“The business has encountered increased competition in recent years, principally from discount stores which have reduced margins.
“It has been on the market for several months but has not attracted any significant interest so far. As administrators, Wilson Field is trading the business in the short term to maximise realisations on a reduced staff base of seven.”
Aristocrat, which employed 19 staff, offered a range of pet supplies including dog and cat treats, chews, small animal bedding, wild bird supplies, poultry and aquatic food.
National Videogame Arcade
Kelly Burton • Leisure & Hospitality • Administration
Image from GameCity.org [http://gamecity.org/]
Over its time, it has also been involved in working in collaboration with Arts Council England, Times Educational Supplement, Wellcome Trust and the British Library to name a few. These projects and collaborations focused on developing the role of videogames in culture and education.
Home of the acclaimed GameCity festival, The National Videogame Arcade in Nottingham, sadly fell into cash flow difficulties earlier this year despite an increase in its footfall. An eleventh hour investment by a director-led consortium, led by director Iain Simons, saved all 40 jobs at the increasingly popular tourist attraction and museum.
The cash flow difficulties led to the destination being taken into administration, Wilson Field’s Andy Wood and Lisa Hogg were appointed as joint administrators on 19th August 2016.
Andy Wood, an insolvency practitioner at business turnaround and insolvency specialist, Wilson Field, said:
“The investment story behind the consortium is based on the passion that Iain Simons and his staff have for the GameCity project.
“We were appointed as administrators after the company fell into financial difficulties, despite growing in popularity. The consortium of investors could clearly see the potential to turn the business around and with support from the staff, GameCity has a new future.”
Director of GameCity and investment consortium leader, Iain Simons, was very happy with securing the last minute investment and the service he received from ourselves: “The NVA is like no other facility within the UK and is rapidly growing in popularity. It was devastating to us when we realised that the business was in financial difficulty, but we knew it could be overcome.
“I have to give all credit to the staff here who volunteered to work without pay when we announced that the business was in trouble and this undoubtedly allowed us the time to pull together a consortium of investors to give the facility a bright new future and secure those jobs.
“GameCity is rapidly picking up pace and the Toast Bar, National Videogame Arcade and our collaborations with new partners in the UK and beyond are proving to be just as popular as we’d hoped.”
For more information on GameCity visit http://gamecity.org and for further information about our insolvency procedures, call us on 0800 901 2475.
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