Our Services - Gibson Hewitt · Members Voluntary Liquidation (MVL) A Members Voluntary Liquidation...

5 Park Court, Pyrford Road, West Byfleet, Surrey, KT14 6SD Tel: 01932 336149 Web: www.gibsonhewitt.co.uk

Our Services

Our ethos We pride ourselves on providing clear expert insolvency advice for when things are not going as planned. We offer bespoke solutions to our clients’ problems in a professional, confidential and sensitive manner.

Business recovery is always at the heart of our practice and we do our utmost to ensure every client recovers from whatever downturn they are experiencing. Our talented business recovery specialists work closely with businesses and individuals to identify issues and find solutions that create a stable foundation for future success. We have been told time and time again by clients that our advice is easy-to-understand and they wished they had come to us sooner. We have helped hundreds of businesses with our wide range of remedies. Where we can’t provide workable solutions, we have a wide range of formal insolvency solutions. However, we see this as a last resort and only recommended when we are absolutely sure there is no viable way forward. In these sensitive cases, we work closely with each client to ensure they meet their legal responsibilities while helping them to settle their affairs, during what can be some of the most difficult times in a person’s life. We are bound by the rules of the ICAEW and the quality of our advice is constantly monitored and regulated by the Institute. We believe our personable, caring, but thorough approach is extremely beneficial to those undergoing insolvency procedures and clients often comment afterwards about how supportive we were. We are proud to be an award winning firm. We were successfully chosen once again as the Client Choice winner of the 2019 Corporate Intl Magazine Global Awards for ‘Corporate Restructuring Advisory Firm of the Year’

In 2018 we won Turnaround Firm of the Year at the TRI Awards for our expertise and commitment to helping clients. Hailed as one of the most prestigious honours in the insolvency profession, the TRI (Turnaround, Recovery and Insolvency) awards celebrate the best professionals and firms in the UK.

Lynn Gibson - Director

www.gibsonhewitt.co.uk • 01932 336149

Company Voluntary ArrangementsIf your company is facing insolvency, a Company Voluntary Arrangement (CVA) may allow you to reach an agreement with your creditors which will enable you to continue trading, subject to an agreed payment plan.

CVAs are only available through an insolvency practitioner such as Lynn Gibson at Gibson Hewitt. Fortunately though, the application process is simple, and your practitioner will do the all the hard work for you. The application process is as follows:

Arrangement approved?If your arrangement is voted for by creditors owed at least 75 per cent of the creditors who vote, congratulations! You are now able to resume trading under your arrangement and on successful completion you will be solvent.

Arrangement not approved?If, at the meeting stage, your arrangement is not approved by at least 75 per cent by value of the creditors voting, your company could face voluntary liquidation. In the event of this, your practitioner can advise on your options.

You and your practitioner will determine the conditions of your arrangementImmediately on their appointment, your adviser will help you map out an arrangement and restructuring plan showing the amount of debt you are liable to pay, and an appropriate payment plan.

Creditors meet to vote on your arrangementOnce your arrangement is in writing, creditors will be invited to a meeting to vote on your draft agreement before it goes ahead.

Find out which arrangement suits your businessLimited companies will need a CVA, but sole traders may need an Individual Voluntary Agreement (IVA). Limited liability partnerships (LLPs) will need all partners to agree to apply.

Appoint a specialist insolvency practitionerIt is crucial to appoint an experienced insolvency practitioner to guide you through the CVA or IVA process.

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4. A Statement of Affairs and Director’s Report will be preparedYour insolvency practitioner will ask you to give the current market values of the company’s assets and give full details of everyone the company owes money to. This information will be used to help you prepare a Directors’ Estimated Statement of Affairs. You will need to provide a trading history of the company for your Director’s Report to creditors.

6. Seek approval from your creditorsCreditors must be advised within 14 days of the winding-up resolution. Creditors will vote to ratify your liquidator by a simple majority of votes. Usually immediately after the shareholders resolution.

7. The liquidator will take charge of liquidating your companyThe liquidator will then be in control of the company, realising assets, agreeing creditors’ claims and carrying out all necessary procedures required by the Insolvency Act and Rules, reporting to creditors and shareholders by way of progress reports.


3. Board of Directors resolve to wind up the company

The Board of Directors will pass a Board Minute resolving to place the company into creditors’ voluntary liquidation. Gibson Hewitt will be appointed to assist them in doing so and will provide all the necessary documentation.

5. Agree to a ‘winding up resolution’ with your shareholdersYour advisor will notify all shareholders and will ask them to vote on the resolution to place the company into creditors’ voluntary liquidation (CVL) and to appoint a liquidator of their choice. The passing of the resolution by 75 per cent of shareholders voting places the company into CVL and appoints the liquidator.

2. Appoint a licensed insolvency practitioner as liquidatorIt is often best to appoint a licensed insolvency practitioner at an early stage for advice from the outset. A licensed insolvency practitioner will give you advice on what action the directors should take and also how to keep the directors’ safe from claims for wrongful or fraudulent trading or preferences.

1.Determine which type of liquidation is right for you If your company cannot pay its debts, you may need a creditors’ voluntary liquidation. If your company is solvent and you simply want to close your company, you may need a members’ voluntary liquidation. If you take no action, you may be forced into compulsory liquidation.

Creditors Voluntary LiquidationThe liquidation or ‘winding up’ process can allow a company’s assets to be used to pay off its debts – with any money left over being paid to its shareholders. If your business is unable to pay its debts, it is important to act fast to prevent putting directors at risk of facing action for wrongful trading.

It is important to appoint an insolvency practitioner such as Lynn Gibson at Gibson Hewitt, who will guide you through the liquidation process, which is as follows:

Pre Pack AdministrationPre Pack Administration is where the sale of business is negotiated prior to a company entering administration – and the sale is effected by an Administrator either upon appointment or shortly thereafter.

The process offers several advantages, including a smooth business transition, maintained brand value, uninterrupted supply to clients/customers and an enhanced return to creditors. The reality is that this process can often be the best route for all those concerned.

If you are interested in Pre Pack Administration, please contact Lynn Gibson or another member of our Insolvency Team at Gibson Hewitt, who will work with you through the process, which is follows:

First and foremost, if your business is in any sort of financial difficulty, it is imperative to seek professional advice.

Seek the advice of an Insolvency Practitioner

Pre Pack Administration vs. alternatives

Why is it not appropriate to trade the business and offer it for sale as a going concern during the administration?

Have major creditors been consulted?

What was the outcome?

Administration appointment and distribution of proceeds

Once the sale of the business is effected, notification of the sale must be provided to creditors within seven days of the transaction. This is along with full disclosure of the transaction and parties involved. Proceeds of the sale will then enable distribution to creditors.

A sale can be made to a connected party but careful consideration must be given. Full disclosure will be required with regards to:

a) Details of the transaction.

b) Parties involved.

c) Whether the pre-pack pool was consulted, and a copy of their opinion

Sale agreed

a) The sale of the business will be negotiated prior to the appointment of an Administrator.

b) The sale will then be effected by an Administrator on or shortly after their appointment.

Assess the viability of the business

Obtain a valuation, consider marketing the business for sale and discuss the options available to you with your Insolvency Practitioner.

Market your business effectively

The business should be marketed as widely as possible, proportionate to the nature and size of the business. The following must be given consideration:

a) The marketing strategy must be clear and justifiable

b) It must be adequate and independent.

c) It must be considered how the marketing strategy will achieve the best results.

2.1.

4.3.

6.5.7.


Connected Party transactions

Members Voluntary Liquidation (MVL)A Members Voluntary Liquidation (MVL) is a voluntary procedure to wind up the affairs of a solvent company. It is often used to close or wind up a company because the director(s) wish to retire, re-organise or restructure the business, or because the company is simply no longer required.

In some cases a simple strike-off is appropriate, but seeking the professional advice of an Insolvency Practitioner such as Lynn Gibson at Gibson Hewitt is essential in order to determine the best option to suit you. MVL provides certainty – and can potentially provide a significant tax advantage if the company has adequate funds to distribute to shareholders prior to dissolution. The MVL process is as follows:

1. Seek the advice of an Insolvency PractitionerIf you believe your business has excess assets over liabilities, your business may be suitable for a Member’s Voluntary Liquidation (“MVL”). Discussing your business’ specific circumstances with an Insolvency Practitioner will allow an assessment to be made and professional advice to be given.

2. MVL processa) Your Insolvency Practitioner will help you to

prepare a declaration of solvency which must be sworn by the majority of directors.

b) The company must be in a position to pay all of its creditors plus statutory interest and the costs of winding up within 12 months.

c) Directors call and hold a board meeting and resolve to call a General meeting of the company. All documentation is provided by Gibson Hewitt.

d) Members/shareholders will consider resolutions, one of which will be to voluntarily wind up the company and then to appoint the liquidator.


3. Liquidator appointedOnce appointed, the Liquidator will:

a) Take control and realise any company assets.

b) Pay any creditors in full.c) Deal with any final tax returns and

outstanding payments.d) Distribute remaining funds/assets

to shareholders in accordance with shareholdings either in specie or in cash.

e) Advertise the liquidation in the London Gazette.

4. Dissolutiona) On completion, the Liquidator will issue a final report.

b) The final report is sent to all shareholders and will be filed at Companies House.

c) Within three months of filing the company is dissolved.

The differences between liquidation and insolvency It is a common misconception that a company in liquidation must be insolvent. However, this is not always the case.

First, it is worth noting that there are two key paths that companies going into liquidation will usually follow. These are Members Voluntary Liquidations (MVLs) and Creditors Voluntary Liquidations (CVLs).

MVLs are used by solvent companies, while CVLs are used by insolvent companies. However, both differ tremendously from insolvency. Below, we have put together a useful infographic highlighting the key differences between the three:


Members Voluntary Liquidations (MVLs)

The company prepares a declaration of solvency to confirm that it is able

to pay all of its debts in full.

The company voluntarily decides to wind up its affairs – usually because the business is no longer required or

its directors wish to retire.

An MVL can be used as a means of resolving a shareholder dispute.

The company can be dissolved fairly quickly (usually within three months).

Once the company is wound-up, funds are distributed to shareholders

in a tax-efficient manner.

The liquidator can return funds to directors and shareholders as capital.

It will be clear to the public that the company chose to wind-up for reasons

other than insolvency.

Once wound-up, the process will be seen by the public as a company choice

and not a hostile creditor action.

The company is unable to pay its debts. However, the CVL process will enable

it to use its assets to pay off these debts at a later date.

The company voluntarily decides to wind up its affairs in order to pay its

debts as far as it can.

A CVL protects the company from further legal action. It can also protect any personal liability of the directors.

The process is fast and the company can be placed into CVL

in approximately two weeks.

All assets, and possibly the business, are sold to pay creditors.

Employees can claim unpaid wages and redundancy pay from the Government. However, there is usually no real return

for shareholders.

The company is unable to pay its debts as the value of its liabilities outweighs the value of its assets.

The company must act fast to consider its options, otherwise it could be forced into compulsory liquidation.

If the company does not act, directors could be at risk of facing legal action. Directors could also be

found personally liable for debts.

The insolvent company will need to go into Administration or liquidation unless it enters a Company Voluntary Arrangement

(CVA) or explores other options ASAP.

Creditors may chase the company for a long time, or petition the Courts for the

company’s liquidation. This can be stressful unless fast action is taken.

Valued employees are most likely to disperse and seek

employment elsewhere.

News of a business entering compulsory liquidation will be viewed as a hostile

creditor action by the public and the media.

Creditors Voluntary Liquidations (CVLs) Insolvency

Individual Voluntary ArrangementsIf you are facing debt, or you are a sole trader or partnership partner facing bankruptcy, an Individual Voluntary Arrangement (IVA) may allow you to reach an agreement with your creditors to pay all or part of your debts. When approved, this will give you more control over your existing assets than bankruptcy – and prevent your creditors from taking debt-related action against you.

IVAs are only available through a licensed insolvency practitioner such as Lynn Gibson at Gibson Hewitt. Fortunately though, the application process is simple, and your practitioner will do all the hard work for you. The application process is as follows:

Arrangement approved?If your arrangement is approved by 75 per cent by value of creditors who vote, the IVA will take effect and bind all unsecured creditors whether they voted for it or not.

Your licensed insolvency practitioner will be appointed Supervisor to oversee the IVA. Notice of the IVA will be added to the Individual Insolvency Register, but will be removed on completion.

Arrangement not approved?If your arrangement is not approved by creditors your IVA will not take effect and your creditors will be entitled to take action against you as before.

In this event, your practitioner can advise on your options.

Your adviser will contact your creditors to discussIn order for your IVA to begin, creditors will be asked to vote on your proposal. 75 per cent by value of the creditors who vote must vote for the proposal for the IVA to take effect. Your practitioner will contact your creditors and negotiate with them on your behalf.

Then...


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Your practitioner will map out your arrangementUsing the information you provide, your adviser will work out and agree with you what you can afford to repay, on what basis, and how long the IVA will last.

Appoint a specialist insolvency practitionerIt is crucial to appoint an experienced insolvency practitioner to guide you through the IVA process.

Discuss all relevant information with your adviserIn order to act in your best interests, your practitioner will need to fully understand your financial position. Make sure your adviser has a clear picture of your debtors, creditors, income and assets.

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1. Appoint a specialist insolvency practitioner

It is crucial to appoint an experienced insolvency practitioner to assess your

circumstances and determine whether any other options may be available to you.

9 volt

Personal BankruptcyIf you are unable to pay your personal debts, you may have to declare yourself bankrupt. Bankruptcy is usually considered a last resort, so it is important to speak to a licensed insolvency practitioner such as Lynn Gibson at Gibson Hewitt to assess your options before choosing this path.

Most debts will be covered by a bankruptcy order, but some creditors may still be able to take action against you to get their money back.If bankruptcy is the only available option to you, an insolvency practitioner can walk you through the process during this difficult time. The application process is as follows:


4. Your application will be reviewed by the Insolvency Service

An adjudicator from the Insolvency Service (IS) will review your application for you and decide whether

or not you should be made bankrupt.

3. Apply for bankruptcy onlinePersonal bankruptcy can only be applied for online.

You will need to provide substantial evidence of your financial situation, which your adviser can help you to prepare. The application process has a standard fee of £680. If any errors are made, your bankruptcy may be declined.

Bankruptcy order approved?If an adjudicator agrees to your bankruptcy, you will receive a copy of your bankruptcy order. Your assets will now be used to pay your debts – but you will need to follow certain restrictions and you may need to attend an interview. Your details will be published in the Individual Insolvency Register.

Bankruptcy order declined?If you have lived in the UK for six months or more and you are able to prove that you cannot pay your unsecured debt, you are highly unlikely to be declined a bankruptcy order. In the rare case your bankruptcy order is declined (usually due to incorrect information in your application form) your practitioner can discuss your options.

or

2. Discuss all relevant information with your adviserIn order to act in your best interests, your practitioner will need to fully understand your financial position. Make sure your adviser has a clear picture of your debts, creditors, and financial situation.

Spotting the signs of stress

Symptoms of business stress Early identification of business stress is very important when seeking to turn a company around which is why it is important to identify signs of stress, which include: Deteriorating Results • Declining profitability, in particular at an operating level • Significant ‘exceptional’ costs • Breached, waived or manipulated covenants • Deteriorating Key Performance Indicators (KPIs) • Inability to explain trends in KPI

Reduced Liquidity • Inability to meet interest payments or scheduled costs • Poor or negative operational cashflow • High non-operational cashflow • Tight or reduced cash reserves (headroom) • Trapped or restricted cash balances

Balance Sheet • Creditor numbers and liabilities outpacing business growth • Low asset to liability ratio • Significantly under-funded pension schemes • Investment in working capital ahead of growth • Deteriorating credit ratings

Operational Challenges • Removal of credit insurance • Difficulties fulfilling orders on time and within quality parameters • Increased use of ‘short-term’ cost reduction programmes • Additional management time taken up managing stakeholders


Taking Action When you realise your business is showing signs of stress it is critical to act quickly to remedy the issues your business faces – it is never too soon to ask for help. Your first step should always be to contact a business recovery firm. The sooner a business recovery specialist can get working, the better the chance of turning the company around.

If problems within your business are left to fester the task of bringing your company and its operations back into profit becomes far harder and much more serious actions will be required further down the line. In the worst case scenario you may end up facing the prospect of insolvency, which can have a long-term impact on you, your employees and other businesses.

At Gibson Hewitt we regularly hear from business owners who say they wish they had spoken to us the year before. Do not be one of these businesses, the sooner the action the more potential remedies we can offer.


Testimonials These testimonials are from people whose lives and businesses we have turned around for the better. Some are anonymous due to the sensitive nature of our business. We can guarantee however, that they are genuine.

I want to thank you both for the expert and professional way in which you have assisted me in

dealing with this and getting to this outcome. From experience you will know, rather better

than me, that it is a stressful process for your clients to go through and it is made considerably easier

by your calm and clear advice and timely action in dealing with things. I particularly wanted to thank

you both for all your help. Mr W of Eastbourne (April 2019)

Thank you for undertaking the task of liquidating my company. The process was remarkably

painless and efficient and Jana was very good at keeping me informed along the way. I met

yesterday with my regular coaching supervision group and three of them are considering winding up

their companies and I was happy to recommend you to them. Mr P (July 2018)

We were recommended by our lawyers to seek the advice of Gibson Hewitt following

a matter of suspected insolvency with our company. Our initial meeting clearly demonstrated

the depth of experience of Gibson Hewitt and in particular its senior partner Lynn Gibson.

Our case was a difficult one and resulted in unreasonable challenges from our other

shareholders/directors. Gibson Hewitt were able to offer sound advice and ensure that the end result

was not only a fair outcome to us but a definitive end to what could have been a long and costly

process. I would not hesitate in recommending Gibson Hewitt to any other company for advice on

insolvency issues. Mr M – Former Director, Boxsizer Ltd. (May 2018)

Phil and Lynn have been excellent in handling the liquidation of my wife’s business

and her insolvency issues. Phil is very knowledgeable, efficient and is always available

to help when you need him – Making an incredibly difficult time that bit easier. My wife had

a baby just as we needed to sign some important papers, so Gibson Hewitt sent one of their

team to the hospital with the papers! Gibson Hewitt offer a professional, friendly and reliable

service and I would happily recommend them. Mr & Mrs W (February 2018)


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