UK Law and Practice Contributed by: Kate Stephenson and Zoe Stembridge, Kirkland & Ellis
(licensed insolvency practitioners) who collect and sell the company’s assets and distribute the proceeds to creditors (and members, in the unlikely event of a surplus). Accordingly, existing management loses control. The liquidators’ duties are owed to the credi - tors as a whole. There are three types of liquidation in the UK:
schemes and restructuring plans have proven effec - tive to implement a variety of restructurings, includ - ing amends-and-extends, standstills, debt-to-equity swaps and other comprehensive reorganisations. These processes do not automatically trigger a mora - torium of claims or proceedings. Receivership A secured creditor may enforce its security by appointing a receiver over specific secured assets, in accordance with the terms of the security docu - ment. The appointment can be made without court involvement. Following the appointment, the receiver will have broad powers specified in the security docu - ment, including to collect any income from the asset and to sell it. 1.3 Statutory Officers Administrators These are licensed insolvency practitioners appointed when a company goes into administration. The admin - istrators take control of the company and have broad powers to manage its affairs. Their primary duty is to achieve one of three statutory purposes: • rescue the company as a going concern; • achieve a better result for creditors than liquidation; or • realise property to make a distribution to secured or preferential creditors. Administrators are appointed by the court, the com - pany or its directors, or by a qualifying floating charge holder. Liquidators These are licensed insolvency practitioners appointed when a company goes into liquidation. Their role is to realise the company’s assets and distribute the proceeds to the company’s creditors. Liquidators are appointed by the court in a compulsory liquidation and chosen by creditors or members in a voluntary
• compulsory liquidation by court order; • creditors’ voluntary liquidation (CVL); and • members’ voluntary liquidation (MVL). Moratorium
There is a standalone moratorium proceeding, which can benefit distressed companies by giving them various protections from creditors, providing them with “breathing space” to formulate a rescue. This is a “debtor-in-possession” process: a company in a moratorium remains under the management of its directors, but the moratorium is supervised by an insolvency practitioner, called a “monitor”. Owing to various constraints as to eligibility for and effective - ness of the moratorium, this process is rarely used for large capital structures. Administrative Receivership If a company grants a “qualifying floating charge” to a party for the purposes of English insolvency law, that party will be able to appoint an administrative receiver if the qualifying floating charge falls within one of the limited exceptions under the Insolvency Act to the prohibition on the appointment of admin - istrative receivers, or if the security document pre- dates 15 September 2003. Administrative receivers have a similar status to office-holders in a collective insolvency regime (such as administration), except that administrative receivers owe their duties to their appointer, and not to creditors as a whole. Schemes of Arrangement/Restructuring Plans A company may utilise a scheme or restructuring plan to reach a compromise with creditors (and/or share - holders) whilst existing management continues to operate the business. These are in-court processes. The key difference between schemes and restructur - ing plans is that the court can approve a restructuring plan that not every class has approved, whereas a scheme requires every class to vote in favour. Both
liquidation. CVA Chair
This is the licensed insolvency practitioner responsi - ble for reporting to creditors and the court after CVA meetings.
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