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
Oldham Precision
Kelly Burton • Construction & Engineering • Administration
Machining engineers Oldham Precision, has been bought out of administration, saving all 12 jobs.
The company’s principal activity was the subcontract manufacture of large volume batch precision machined components for clients across a wide range of industries including aerospace, paper converting, printing, coatings, electronics and valve construction.
Administrators Kelly Burton and Lisa Hogg from Sheffield business turnaround experts Wilson Field were appointed joint administrators on 17 January after the company suffered cash flow problems.
Originally established in 1982, the company, based at Red Rose Business Park on Shaw Rd in Royton, offered subcontract engineering including CNC milling, grinding and turning.
After advice from Wilson Field, the business was sold to the existing management team as a going concern, saving all 12 employees’ jobs.
Kelly Burton, director in the Leeds office at Wilson Field said:
“Following discussions with the director, the business was sold as a going concern, safeguarding all 12 employees’ jobs and offering a better return for the company’s creditors than alternative options.
“The new company will be under the same management offering the same standards of service to its customers.”
ARB (Sound Vision Light Power) Limited
Kelly Burton • Leisure & Hospitality • Administration
Wilson Field has secured a new future for a Banbury-headquartered events management company, which boasted clients including Crufts, Tour of Britain and Virgin London Marathon after it was bought out of administration.
ARB (Sound Vision Light Power) Limited was established in September 2014 and specialised in event hire including providing audio-visual solutions, equipment, hire, and installation.
The company, which traded from Coton Cottage, Chacombe near Banbury, called in administrators from Sheffield-headquartered Wilson Field for formal insolvency advice.
The company, which has an impressive client list and relied solely on sub-contractors as and when needed, suffered VAT and HMRC issues as a result of a period of illness.
Kelly Burton and Lisa Hogg from Wilson Field were appointed as joint administrators on 20 February and concluded a pre-packaged sale of the business and assets for an undisclosed sum to ARB Motors Limited, led by the same management team.
Kelly Burton, director and licensed insolvency practitioner at Wilson Field said:
Wilson Field was brought in to look at the situation of the business.
The focus on the company had diluted during a period of illness of one of the two directors. A debt was due to HMRC and a repayment proposal was rejected resulting in the need to protect the business and assets via a formal insolvency procedure.
The pre-packaged sale means the business, which was an established player in event management at large scale events, has a bright future moving forward.
The loss of a major employee’s input through illness can harm an organisation and it is important for businesses to seek help should this arise. Timing is essential to keep focus on the business.
ARB has combined experience of more than 100 years and provided hire equipment such as indoor and outdoor PA systems, single and double-decker commentary units, street sound vehicles, exhibition TVs, stage lighting and mobile power in both primary and secondary distribution.
Designer Recliners Limited
Kelly Burton • Manufacturing • Administration, Company Voluntary Arrangement (CVA)
A Sheffield furniture manufacturer and upholsterer has relaunched offering a smaller, more specialised range of products.
Anico Interiors Limited, whose range included reclining chairs for the elderly, had suffered cash flow problems and issues with profitability.
Designer Recliners Limited, managed by director Nick Wall, has purchased the assets and business of Anico, saving all 11 jobs.
Andy Wood and Robert Dymond from Sheffield business turnaround experts Wilson Field were appointed joint liquidators on 8 June and advised on the sale of the 14-year-old company, based on Orgreave Crescent at Orgreave Industrial Estate, as a going concern.
Andy Wood, associate director and insolvency practitioner at Wilson Field said:
“Historically, the company offered a wide range of products but has now streamlined its offer to customers and cut out some unprofitable lines, as well as revamped its website.
“Directors took advice from Wilson Field with the business sold to new company Designer Recliners Limited as a going concern, safeguarding all 11 employees’ jobs. The new company will offer the same service and standards under the same management team but focus on a smaller range of specialised products.”
The company employs skilled staff including upholsterers, seamstresses and cutters and was set up in 2002 by Nick Wall.
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