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Untitled Document
Detrimental Information
County Court Judgments (CCJ)
A County Court Judgment (CCJ) is where a judgment has been entered against a
company for an outstanding debt.
Satisfactions
When a company settles a CCJ that has been lodged against it, a satisfaction
notice can be obtained. This can only be issued from the court where the CCJ
was issued. It is the responsibility of the company to obtain a satisfaction
notice. Even though the CCJ will then show as satisfied on the company's credit
file, this will stay on the file for six years.
Cancellations
If a company settles a CCJ that has been lodged against it within 28 days from
the date of the judgment, then the CCJ will be cancelled.
High Court Writs/Claim Forms (HCW)
These are records of writs issued against companies for a variety of civil proceedings,
including monies owed. Although the cause of action is not displayed, high volumes
of HCWs registered against a company should be generally regarded as adverse,
particularly where the company is of small to medium size.
Insolvency
In terms of a company, insolvency means:
A company whose assets are insufficient to meet expenses and its liabilities.
A company that has been made subject of an Administration Order or an Administrative
Receiver appointed.
In 1986 the Government reformed the Insolvency Acts in order to clarify anomalies
in the old legislation. Hence, the 1986 Insolvency Act. This is the Act of Parliament
for which insolvency procedures are administered. Insolvency law provides a
system of dealing fairly with the claims of the creditors and that of the assets
of the insolvent company. The law also deals with the company after insolvency.
Who deals with Insolvency?
1. The Official Receiver (civil servants in the Insolvency
Service and Officers of the Court):
Duties:
- handle the early stages of compulsory liquidation.
- administration of cases.
- report evidence of criminal offences to a prosecuting agency.
- report unfit conduct by company directors to the Secretary of State.
2. Insolvency Practitioner (private sector, usually
accountants or solicitors):
They are required by law to be authorised to act as Insolvency Practitioners
by the Secretary of State for Trade and Industry or by one of the Recognised
Professional Bodies(authorised by the Secretary of State).
Duties:
- in the early stages, to try and rescue the company.
- usually appointed if there are significant assets. He/she may be appointed
as trustee/liquidator in place of the Official Receiver. (All other procedures
are handled by the Insolvency Practitioners).
- act as liquidators in creditors' voluntary liquidations only.
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Meeting of Creditors
Creditors are usually the first to know whether a company is experiencing financial
difficulties when they do not get paid. As a result a Meeting of Creditors will
be called in order to examine outstanding amounts and to determine the next
course of action. If a decision is made to place the company in liquidation
a notification will be made in the London Gazette or other publications.
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Liquidation Committee
At the Meeting of Creditors a "Liquidation Committee" can be appointed.
This committee which consists of three to five appointed creditors supervises
and assists the liquidator on behalf of all the creditors. This committee must
approve certain actions proposed by the Liquidator and each committee will have
different powers, including - agreeing to carry on the company's business, bringing
and defending legal actions. They must also approve payments to any other class
of creditor. They also fix the remuneration of the Insolvency Practitioner who
is acting as liquidator. If there is no committee this fee will be fixed at
the Creditors' Meeting.
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Company Voluntary Arrangement
This allows a company with financial problems to reach a formal binding agreement
with its creditors. The main purpose is to pay off outstanding debts before
consideration is given to further action, i.e. liquidation. This can be proposed
by the directors, administrator, liquidator or the debtor (but not creditors).
This arrangement is handled by a nominee who becomes the supervisor. Creditors
will receive reports on an annual basis and within 28 days of completion.
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Members Voluntary Liquidation
This allows a solvent company to put itself into liquidation.
By Special Resolution the shareholders of the company (for many reasons, i.e.
illness, death of a shareholder or retirement of a director) decide to wind
the company up. The directors make a statutory declaration that all debts to
creditors will be paid up within a given time period. (Not exceeding 12 months).
The declaration sent to Companies House will include a statement of the company's
assets and liabilities.
There is no meeting of creditors. However, creditors must make sure that they
file their claims.
A Notice of Resolution must be published in the London Gazette within 14 days
and a copy must be sent to the Registrar of Companies within 15 days. There
is no requirement to notify creditors.
A Liquidator will be appointed in order to wind up the affairs of the company.
If the Liquidator finds that debts will not be fully undertaken, then he/she
has the power to call a creditors meeting and the liquidation becomes a CREDITORS'
VOLUNTARY LIQUIDATION. At any stage of the proceedings an unhappy creditor can
petition for the company to wind up its affairs.
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Creditors Voluntary Liquidation
The most common reason for this type of liquidation is that the directors have
concluded that the company cannot meet its debts and is unable to continue to
trade. This procedure allows an insolvent company to place itself into
liquidation without the need for a court order. A copy of the Resolution is
sent to Companies House within 15 days. It is permitted that a Liquidator is
appointed before the meeting of creditors but it is provisional ONLY until approved
by the creditors. Until confirmed by the creditors meeting the Liquidator will
supervise proceedings, at this stage he cannot dispose of any asset (except
perishable goods) without reference to the court. Creditors must prove their
entitlement to vote at the meeting.
A Liquidator MUST be a licensed Insolvency Practitioner who is required to have
a bond as security for the performance of his/her functions. He/she MUST have
a certificate of specific penalty under the bond for an amount at least equal
to the assets of the company. When he/she receives their certificate a copy
MUST be sent to the Registrar of Companies within 14 days if he/she is acting
as Liquidator. All creditors are to be notified within 14 days of the members'
meeting. Creditors can petition for compulsory winding up.
The Liquidator must send the following to Companies House:
(1) a statement of affairs within 7 days of the creditors meeting.
(2) a duplicate statement of receipts and payments for the first 12 months.
(After this period every 6 months until the liquidation is complete).
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Striking Off and Dissolution
Striking off actions can be of either a voluntary or a compulsory nature. A
company can apply to Companies House to be voluntarily struck off. This often
arises where the purpose the company was set up for is no longer relevant or
the officers behind the company are retiring from business. Companies House
can themselves initiate striking off actions against companies if they fail
to file Annual Returns on time or do not pay fees owing to Companies House.
If a striking off action is not suspended or discontinued it will lead to the
dissolution of the company. Dissolution ends the life of the company and it
ceases to be a legal entity.
Companies House will issue a three months notice before the dissolution date.
This will give any creditor objecting to the dissolution a chance to stop the
process. If a company has been struck off the register and dissolved it may
be restored by application to the courts.
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Compulsory Winding Up
The term describes the processes involving the realisation (sell off) and distribution
of a company's assets and usually the closing down of the business.
The Court will issue a Compulsory Winding Up Order on the petition of a creditor
on the grounds that the company cannot meet its debts. Prior to the order being
made, a creditor will present a Petition for the winding up of the company to
the court. Details MUST be published giving presentation date; name of the petitioner
and the hearing date. The solicitors acting on behalf of the petitioner will
also be quoted. The main steps, which will lead to a petition being presented,
is the failure to pay an overdue debt OR respond within a given period of time
(21 days) to a statutory demand.
There are two ways to wind a company up:-
(1) By Court: The Judge will either make a Winding Up Order OR dismiss the
case
(2) By Members/Creditors Winding Up
A successful petition will result in the Court making a Winding Up Order against
the company. The Liquidator is the person(s) appointed to administer the liquidation.
He/she will sell off the assets to meet the debts. The liquidation process may
take several years, with the eventual outcome once all assets have been realised
generally being the dissolution of the company.
When the order has been made, the court will appoint an official receiver.
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Function of the Official Receiver
He/she will take the responsibility and will decide if to call a meeting of
creditors, appoint himself/herself as Liquidator or someone else.
He/she has the power to investigate the conduct of the directors. Under the
1986 Act directors can be ordered to contribute to the assets if they knew or
should have known if the company would go into insolvent liquidation. If he
appoints himself as Liquidator he will investigate the causes of the company's
failure. If the company has no assets and no fraudulent practices are evident
he will apply to the registrar to dissolve the company. After his investigations,
the Liquidator can decide on various ways of dealing with the case. He can require
or dispense with the statutory statements of affairs and he can choose to make
a preliminary report to the Court.
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Administration Order
The directors of a company may ask the Court for an Administration Order to
be made in order to prevent creditors of the company putting it into liquidation
or receivership if there is a reasonable prospect the business can be saved.
The court appoints an administrator who takes over the running of the company's
affairs and attempts to come up with a solution to its financial difficulties.
(At this stage, a Receiver cannot be appointed). The main aim of an Administration
Order is to attempt to save the whole or any part of the company instead of
winding it up. Whilst this order is in force the company cannot be wound up.
There are restrictions over the company's security over its property, repossession
of goods and the institution of legal proceedings. The Administrator is responsible
for advertising in the London Gazette and a newspaper.
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Administrative Receivership
The purpose of Administrative Receivership is to recover monies owed to a secured
creditor. The creditor will appoint a Receiver who will have the power to manage
the affairs of the company. (The Insolvency Practitioner dealing with the case
is referred to as "THE RECEIVER"). This is to ensure that the company
continues to trade with the aim that receivership is just a temporary stage.
However, receivership could also mean the first step to ending the company's
life.
A receiver is appointed by a holder of a charge in order to
deal with an asset(s) secured by that charge.
An administrative receiver is appointed by or on the behalf
of the holder of a Debenture. He/she is required to make a report to the Registrar
and to the creditors within three months of his/her appointment, explaining
circumstances of his appointment and his intended action.
When the company's affairs are fully wound up, the Liquidator presents an account
to the members and creditors. The account and final meetings must be sent to
the Registrar within a week of the meeting taking place.
NB: a company in administrative receivership is often referred to as being "in
receivership."
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