B)  Individual Voluntary Arrangement

One of the insolvency practices that has grown rapidly during the recent credit crunch is the Individual Voluntary Arrangement or IVA.

Individuals entering into an IVA can potentially avoid bankruptcy, subject to the terms of the IVA being fully complied with.

Initially, the debtor will approach an insolvency practitioner, who specialises in this process.  An interim order will be applied for at the courts to protect the estate of the debtor, whilst the scheme proposal is being prepared.

The proposal is then forwarded to the creditors, which covers:-

a)   The reasons for the arrangement (why they cannot pay their debts).

b)   Details of all the debtors’ assets and what will happen to them.

c)    How the liabilities of the company will be dealt with, in particular preferential and secured creditors, along with details of any debts due to associates or the debtor.

d)   The duration of the arrangement (this is typically between 36 and 60 months).

e)   The name of the proposed insolvency practitioner who will be dealing with this matter (known as the supervisor).

f)    The remuneration of the supervisor.

g)   If the business is to continue trading and on what terms.

For a voluntary arrangement to proceed a 75% majority of creditors must agree to the terms.  A report should be sent out every 12 months to creditors and if the debtor fails to comply with the terms of the voluntary arrangement, the supervisor is at liberty to petition the courts for the bankruptcy of the debtor.

C) Informal Voluntary Arrangement

This follows a similar format to a voluntary arrangement.  However, it does not carry the protection of the court.  Therefore, any creditor is at liberty to commence independent bankruptcy or regular court proceedings against the debtor, unless a written agreement exists to the contrary.

Limited Liability Organisations

There are a number of formal insolvency types for corporate bodies (limited, plc or LLP companies).  The main ones are as follows:-

a)  Compulsory Liquidation

b)  Creditors Voluntary Liquidation

c)  Members Voluntary Liquidation

d)  Receivership

     i)  Administrative Receivership;

     ii)  Law Of Property Receivers

e)  Company/Corporate Voluntary Arrangement

f)  Administration Order

g)  Informal Schemes

A limited liability company or limited liability partnership (limited, plc or LLP) can be subject to any of the above forms of insolvency.