Company rescue

What is company rescue?

Company rescue is the group of formal procedures under the Insolvency Act 1986 that aim to save an insolvent but viable limited company, or its underlying business, rather than close it down, by restructuring its debts or protecting it from creditors while a solution is found. The two main routes are a Company Voluntary Arrangement and administration.

Rescue is the right path when the business is fundamentally sound but weighed down by historic debt or facing immediate creditor pressure it cannot survive. Instead of the company being wound up, its debts are restructured or it is given legal protection while a sale or turnaround is arranged. Rescue sits opposite closing a company, and the first job is to decide honestly which of the two your company needs.

What company rescue options are there?

There are two main company rescue procedures under the Insolvency Act 1986, and which one fits depends on how much pressure the company is under and whether the directors need to keep control: a Company Voluntary Arrangement restructures the debt while the directors keep running the business, and administration hands the company to an administrator behind a legal moratorium.

Here is how the two routes differ and where each one leads.

• A Company Voluntary Arrangement (CVA) lets a viable company repay some or all of its historic debt from future trading over three to five years, while interest is frozen and the directors keep control of the business.
• Company administration puts an insolvency practitioner in charge as administrator and imposes a moratorium that stops creditor action, giving the business breathing space to be rescued, restructured or sold as a going concern.

Which company rescue option is right for your company?

The right rescue procedure depends on whether the company needs urgent legal protection and whether the directors want to keep control: a CVA suits a viable company under manageable pressure that can afford monthly contributions, while administration suits a company facing immediate creditor action, such as a winding-up petition, that needs the protection of a moratorium.

These are the questions we work through with you to decide.

• Is a creditor about to take court action? If a winding-up petition is looming, administration and its moratorium may be the only way to stop it.
• Do you want to keep control? A CVA leaves the directors running the company; administration hands control to the administrator.
• Can the business afford contributions? A CVA needs affordable monthly payments from future trading; if it cannot, administration or closure may be more honest.
• Is there a buyer for the business? Administration is the route where a going-concern or pre-pack sale is realistic.
• Is the business genuinely viable? If there is no realistic future, a creditors' voluntary liquidation is fairer than a rescue that will fail.

How much does company rescue cost?

Company rescue typically costs from around £5,000 plus VAT to set up a CVA and from around £5,000 to £20,000 plus VAT and often more for an administration, with the difference reflecting how hands-on each procedure is. These are indicative ranges to confirm at a free consultation, not fixed prices, because every company and situation is different.

A CVA is usually the cheaper route because the company keeps trading and the fees come out of the contributions it was going to make anyway, while administration costs more because the administrator runs and protects the business. We set out the likely cost of the right route for your company before you commit to anything.

Figures are indicative and confirmed in writing before you commit. Ask us for a clear estimate for your company.

What happens to directors in a company rescue?

What happens to directors depends on the rescue route: in a Company Voluntary Arrangement the directors keep control and continue to run the business, while in administration the directors' powers pass to the administrator, though they stay in office and must cooperate. In both, directors who have acted properly are guided through the process, not penalised.

Two points apply to directors under either route.

• Personal guarantees. Any company debt you personally guaranteed remains your responsibility under both a CVA and an administration, because the procedure binds the company, not you.
• Overdrawn director's loan account. How an overdrawn loan account is treated differs between the routes, and we explain the position for your case before you choose.

How does company rescue compare with closing the company?

Company rescue keeps an insolvent but viable business alive, whereas closing the company draws a line under it, and the right choice turns on whether the underlying business has a realistic future. The table below shows where each of the five main procedures fits, so you can see the rescue options next to the closure options.

Not sure whether to rescue or close? Call us and we will tell you honestly which route fits your company.

Why choose NTF for company rescue?

NTF Corporate Solutions is a boutique insolvency practice whose company rescues are handled by named practitioners, James Kaye and Nick Morgan, who are licensed by the Institute of Chartered Accountants in England and Wales. You deal with an experienced, named practitioner from the first call, whichever route your company takes.

As part of the NTF group, we have helped company directors since 2009, we tell you honestly whether a CVA, an administration or a different route fits your company, and the first conversation is free, confidential and without obligation. If your company can be saved, we will move quickly to do it.